Mortgage interest rates and your credit

If your credit score is low, there's a good chance your mortgage rate will be sky-high. Improving subpar credit can reduce exorbitant mortgage interest rates.

People with credit scores between 760 and 850 typically qualify for the lowest mortgage interest rates. Those with credit scores in the mid-600s may find themselves paying more.

Here are a few simple steps to improve less-than-desirable credit scores and lower the interest payments on a new mortgage:

• Pay your bills in a timely manner. One of the most important things you can do to improve credit and lower mortgage interest rates is to pay all bills on time. Late payments will further reduce your credit score, while paying bills on or before their due date for a few months can reverse the trend.
• Pay down your credit card debt. Paying down your credit card debt is another surefire way to improve your credit score. A helpful hint? Pay down maxed-out cards first. The higher the credit card balance, the greater the damage to your score. If you don't carry a balance, spend less on your card. The balance on your credit report will reflect your monthly charges, and it's that balance that gets factored into your credit score. Except for a zero balance, the lower the balance is, the better for your credit score.
• Keep your credit lines open. Although it may seem counterintuitive, don't cancel any credit cards. Canceling cards can lower your available credit line and therefore, your credit score. Instead, put them in a drawer and forget all about them until credit troubles are long behind you.

You are entitled to a free copy of your credit report from each of the three credit bureaus -- Experian, Equifax and TransUnion -- every 12 months. To obtain yours, visit AnnualCreditReport.com. By putting the above tips into action, you'll be well on your way to reducing mortgage interest rates.

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