The Definitive Guide to Mortgages and Your Credit Score

By Motley Fool

699.That's the nation's average FICO score, which sits at an all-time high.

Continue Reading Below

While the upward trajectory is encouraging, the unfortunate truth is that Americans are generally falling short of what's considered a "good" credit score, i.e., a credit score of 700 or higher.

Improving your credit score can mean the difference between reaching your financial goals and falling hundreds of thousands short.

Image source: Getty Images

More From

For example, people with excellent credit qualify for mortgage rates that are up to 1.5 percentage points lower than someone with poor credit. In dollars and cents, that's a savings of $102,240 over the life of the average 30-year fixed-rate mortgage*.

FICO score essentials

FICO scores are used in 90% of lending decisions, including when getting pre-approved for a mortgage, securing an auto loan, or even signing up for a credit card.

The driving factors of your FICO score can be broken down into five categories, which are weighted as follows:

  • Payment history (35%)
  • Credit utilization (30%)
  • Length of credit history (15%)
  • New credit (10%)
  • Credit mix (10%)

We've highlighted several valuable credit score articles and videos below, which can help get you on the path to mortgage savings by uncovering simple, actionable steps you can take to increase your credit score.

Increase your credit score

5 Simple Tips to Skyrocket Your Credit Score Over 800!Increasing your credit score above 800 will put you in rare company. So rare that only 1 in 9 Americans can claim they're members of this elite club. But contrary to popular belief, racking up a high credit score is a lot easier than you may have imagined following 5 simple, disciplined strategies. You'll find a full rundown of each inside our FREE credit score guide. It's time to put your financial future first and secure a lifetime of savings by increasing your credit score. Simply click hereto claim a copy 5 Simple Tips to Skyrocket Your Credit Score over 800.

*Average new home purchase of $309,000. Current 30-year fixed mortgage rate of 4.31% versus 5.81%. Mortgage rates as of 3/8/17. The Motley Fool has a disclosure policy.