As a matter of fact, it is universally accepted that the higher a person’s credit score is, the lower the risk that person poses to a lender and therefore the lower rates of interest that person will receive with credit. On the flip side of the coin, the lower a person’s credit score, the higher risk they pose and the higher interest rates will be for credit applications.
The same rings true for all credit applications, whether it is for a car, credit card or mortgage. While different countries and credit agencies employ different credit ratings and scales to determine a person’s credit score, they all have the above risk to reward ratio in common with lenders credit terms.
To find out the level of interest and monthly repayments on a particular mortgage for a certain individual, firstly a credit report should be ordered from one of the main credit agencies such as Equifax or Experian. Once the credit score has been determined, research on the Internet will uncover the typical APR rates from various lenders to people with similar credit scores. These, while not exact, will give a good indication of expected rates and terms.
Using the FICO scoring model as an example; if a person’s credit score is between the 490 to 580 region, mortgage interest rates are likely to be about four points higher than the best rates available. At the 581 to 620 level, rates will improve to about 2.20 points higher than the best mortgage rates. From 621 to 660 there will be about a 1.5 point difference and then between 661 to 700 only a difference of 0.5 points, this lowers to 0.25 points at 701 to 760. At the maximum ‘prime’ section of the credit scale of 761 and above, the interest rate on a mortgage will be the best that is available on the market. Please note that the above figures are all approximate and to be used as a guideline only.
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