How credit scores affect what you pay for your house

  Lenders look at your credit score when you apply for a mortgage. This figure, a measure of your past ability to make payments on time and manage your credit, will be somewhere between 300 and 850. With so much riding on this number, it is important to understand your score, and the factors that affect it. Credit bureaus do not penalize you for checking your own score, nor do they deduct points for inquiries from landlords or employers who may check your score with your permission, it’s a good idea to check your credit score with all three bureaus occasionally, especially if you plan to apply for a loan. This gives you an opportunity to correct any errors in your file before lenders make their inquiries. According to a recent survey by Zillow Mortgage Marketplace, nearly 30 percent of all Americans searching for home loans are effectively locked out of the conventional mortgage market because their FICO credit scores fall below 620. According to the study, borrowers with 720 or better scores received an average annual percentage rate of 4.3 percent for conventional, 30-year fixed-rate  mortgages. For those with scores that fell between 620 and 719, the quoted APRs ranged from 4.73 percent and 4.44 percent.  Applicants with scores below 620 were not getting any quotes at all. The three credit reporting bureaus collect data independently - which increases the margins for error, so it's up to you to get copies of each of your credit reports and check for errors. According to a study by the Federal Trade Commission (FTC), approximately one in four U.S. consumers have an error on at least one or more credit reports that could be serious enough to lead to higher rates on loans. If you find an error, you must report it in writing to the appropriate credit reporting agency. Include your name, social security number, date of birth, a copy of the report with the error circled; and copies, not originals, of documents such as social security cards, final payments, release of lien, court orders, or whatever you need to get the report changed. Once you get the information corrected, you will be able to get the best rate possible. This week’s Real Estate Insight: Poor credit is expensive.   For a $200,000   house, borrowers who have FICO scores of at least 760   and make a 20% down payment with a 30-year mortgage will have average annual percentage rate of 4.3% or about $1,166 per month. On the other end of the spectrum, those with 620 to 719 scores – if they can get approved — will pay 4.4% on average or $1,209 per month – which will add over $15,000 in the life of the loan.