How Your Credit Score Can Affect Your Loan Approval

Today's economy has made it more difficult for potential home owners to get a mortgage. Since most lenders have enlisted great restrictions on loan qualification, an individual's credit score has become of even greater importance in the home loan qualification process.

Banks and mortgage lenders use an applicant's credit score as one of the major factors in determining credit worthiness. A high score is best when looking for a loan. A low score can imply that an individual is a credit risk and may not be able to repay a loan. Thus, loans may not be given to individuals with lower scores.
Income, employment status and score are all considered when you apply for a mortgage loan. Though an individual's credit score generally is not the only factor used in determining whether a person will get a mortgage loan it can be a deciding factor.

Those with perfect credit reports are given the best rates on mortgage loans. They qualify for low interest loans and the best terms available. The better the score the better the terms and interest rates for the individual. A lower credit score usually results in higher interest rates and terms that are not as good on the loans.

Credit scores above 720 are considered average and usually loans are approved if a credit reports are in the 720 to 850 ranges. However, if a score is below 720, the individual will generally not be approved for a loan.
If you are planning to apply for a mortgage loan, it is best to check your credit score at least six months prior to your application. This time period will allow you adequate time for fixing discrepancies you might find in your credit report.

Remember that you are entitled to one free credit report per year. Take advantage of this to keep an eye on your credit score and keep it in check, especially if you are in the market for a mortgage loan soon. There are also many other websites that can get you your credit report instantly, some for free and some for a low fee.
If you have been working on paying down your debt load and increasing your credit score, it is good to request a new credit report after you have paid off some of your debt. You will want to ensure everything is reflected properly on your credit report before you make an application for a mortgage loan.  Article Source: http://EzineArticles.com/?expert=Dan_Sawyer