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When trying to get an excellent mortgage rate, there are many things to think about. One of the most important steps in receiving the mortgage rate you want is having a good credit score, otherwise known as a FICO score. Having a low credit score can leave you paying hundreds of dollars more a month.
There are five categories of information used when determining your credit score, each having a different impact on the score overall. These categories are payment history, length of credit history, new credit lines opened, types of credit used, and amounts owed. Any late payments, bankruptcies, or other payment issues will show up under your payment history and negatively impact your score.
With your length of credit history, it's always a positive to have a long history of good credit. Although, it would be negative to have a long history of bad credit. A short history of good credit is also a positive.
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When opening new credit lines it can have a negative impact on your credit score. To save your interest rate on the mortgage loan that you want to secure, wait to purchase any expensive items that would require you opening up a new credit line around the same time. It can save you thousands of dollars in the long run.
Having different types of credit such as credit cards, and various types of loans, can be a positive impact on your credit score leaving you with a much lower interest rate on your mortgage.
With the amount of debt you have, it's simple. The more debt you have, the more negative of an impact it will be on your credit score, ultimately raising your interest rate.
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