Owning a home provides a variety of benefits for homeowners. In addition to the privacy and comfort it offers, buying a house can be a financial boon. Not only does the home offer you a safe way to maintain long-term equity, but since mortgages are typically most people's single largest debt, paying it down can also help lower your credit score, the St. Louis Post-Dispatch reported.
Having good credit in the first place helps you obtain a lower interest rate on your mortgage or it can potentially qualify you for a larger mortgage. Conversely, having a poor credit rating may negatively impact how large of a mortgage you may obtain as well as how much interest you pay back. However, by consistently paying down the note, you will see your credit score increase over time. At the same time, though, defaulting on the deadline or having to go through a short sale or foreclosure will result in a drastic decline of your credit score.
Homeowners insurance rates
Not only will credit scores affect your mortgage amount and interest rates, but it can also affect how much you pay in homeowners insurance as well. According to Insurance Journal, poor credit can cost homeowners up to 91 percent more in insurance compared with people who have optimal credit scores. Even homeowners who have average credit scores can end up paying approximately 29 percent more for insurance.
Since California, Massachusetts and Maryland are the only states that bar the use of credit scores to calculate homeowner's insurance premiums, the overwhelming majority of homeowners will be subject to this criteria. Ignoring your credit score can cost you a significant amount of money over time.
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