How Credit Affects Rates
Good Credit = Lower Interest Rates
Any time a lender gives a consumer 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. If a borrower doesn't repay the loan or pays late, it costs the lender a great deal of money.
Lenders use your credit history, along with information on salary, assets and debts, to predict how much risk is involved with the repayment of the loan. This is much like insurance companies using your driving history to predict your risk of having an accident.
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 often qualify for loans or credit lines with lower interest rates.
High Credit Risk
A borrower who has had credit problems, whose income varies substantially from month to month, or who already owes a lot of money in relation to income poses a higher risk for the lender. In order to offset the potential loss of money if the borrower can't make payments, the lender must charge a higher interest rate on the loan. But over time, a borrower can rebuild a good credit rating in order to take advantage of lower interest rates.
If you've had credit problems, there are things you can do to improve your credit. And YourHomeLoan.info has a number of special loan programs, like our Credit Repair Mortgage and Credit Comeback Loan to help you.