How Credit Affects Rates

Why improve your credit? Because good credit means lower interest rates!

Any time a lender approves a loan, line of credit or credit card, there is a risk that the borrower may not repay the loan on time or at all. Since these risks cost the lender a great deal of money, they determine which borrowers represent the least risk, and pass along lower interest rates to those with the best credit. On the flip side, borrowers who don't bother to rebuild credit, if they qualify, will pay more - or be able to borrow less.

Lenders use your credit history, along with information on salary, assets and debts, to help predict how much risk is involved with the repayment of the loan. This is much like insurance companies using your driving history to help predict your risk of having an accident.

It's clear how important it is to rebuild your credit and improve your credit history. But that doesn't mean that having less than perfect credit will keep you from getting a good loan or rebuilding your good credit. The first step to overcoming less than perfect credit is understanding what makes a borrower a low or high credit risk.

The Difference Between Low And High Credit Risk:

Low Credit Risk
Borrowers with good credit histories, high credit scores, steady income and relatively few debts present a low risk of loss for lenders. So these borrowers are actually sought after by lenders, who compete to get their business by offering the best loan terms and lowest interest rates. Low credit risk could also contribute to a borrower getting a bigger loan or needing a smaller down payment.

High Credit Risk
A borrower who has had credit problems, whose income varies a great deal from month to month, or who already owes a lot of money in relation to income, poses a higher risk for the lender. If approved, in order to offset the potential loss if the borrower can't make payments, the lender must charge a higher interest rate on the loan and might require a larger down payment or reduced loan amount. But over time, a borrower can rebuild a good credit rating in order to take advantage of lower interest rates.

The good news is that if you've had credit problems in the past, there are a number of things you can do to improve your credit score. Countrywide Bank’s Full Spectrum Lending Division prides itself on going out of our way to help our customers – we see the bigger picture and are willing to go the extra mile to find a solution that suits your needs.

Give Countrywide a call today at 1-800-909-8217. Let's talk about your credit history, and see if we can help you find a loan solution that achieves your financial goals. If you think you have bad credit, you may be surprised to learn that you qualify for a prime loan. You’ll never know unless you call.