The result of your mortgage application depends on various factors. Among these factors is your credit score – the higher it is, the better the outcome of your mortgage application.
According to FICO, one way of improving your credit score is by diversifying your loans. One can start with the different types of primary loans which, unfortunately, not a lot of people are informed. By understanding these loans, you can boost your probability of favorable mortgage terms from lenders like primeres.com/corpuschristi.
Student loans can look good on your credit score if you are able to pay them on time. Since student loans take a long time to pay off, it gives you a long credit history – and a positive one if you consistently pay on time.
However, student loans could affect your final debt-to-income ratio and could either lower the mortgage you get or increase your interest rates by a minimal margin.
Unlike unsecured student loans, auto loans are secured debts since your lender can repossess your vehicle if you fail to carry out your debt obligations. In most cases, auto loans raise your credit score since they diversify your debts. Auto loans have a more stringent application process unlike other loans, so your mortgage lender will likely favor you if you have a positive record on your auto loan.
In most instances, a payday loan does not reflect on a credit report. But it can have a considerable dent on your credit score should you default its repayments. The best option is to avoid these loans as much as you can since they have high-interest rates and can be difficult to pay off.
With these types of primary loans, you now have more options of diversifying your loans and improving your credit score. Potential homebuyers must be diligent, committed, and consistent in paying loans to maintain a positive credit report.