Your credit score is based upon how well you have behaved with borrowed money over the last few years and how you are handling your budget at the moment. The idea is that is can grant your lender an idea of the prospect that you will repay your mortgage loan in full, or if there is a possibility that you may get into payment difficulties and fail to pay on the payments.
Clearly, if a bank is going to give you money then they want that total of money back off you, along with their profit in the shape of interest. If they are happy that there is a high probability that you will pay off the loan in full then they may want to attract your to them, considering you as 'easy' money. Those with good credit ratings are most expected to be the least trouble. For that reason, the banks are battling for your custom, so they are keen to offer you a lower interest rate in the contest for you to become a customer of theirs.
This means that those with good credit ratings are rewarded by a battle between the banks and lower interest charges.
At the other end of the scale, there are those that are nearly certainly going to struggle to pay off the full mortgage. For these, their credit score is low and this is where the problems begin. Because there is a higher chance that these customers are not going to complete all of the repayments and might need chasing for repayments throughout the term of the mortgage, some banks will not deal with them. This means less contest for the business of these people.
Also, since there is the bigger chance of failing to complete repayments, the banks will want to try to get as much money back as rapidly as possible. For this reason, the basic interest rate on the finance will be increased to ensure that money is coming in quick and that if as part of a debt difficulty negotiation the monthly total needs to be reduced, then they are still getting enough money back.
But it is not just at the point that you sign up with the lender that the credit score is influential. Right through the term of the mortgage you might have special offers that come to an end and need to be renegotiated.
It may be that you decide that you want to move to a different lender for a healthier deal, but if since you took out the original mortgage you have managed your finances badly and your credit rating has dropped, you might find that other lenders won't do business with you. You may also discover that your lender is now unwilling to move you onto their equally good deals, so it is necessary to stay on the base loan.
That is why your mortgage is related to your credit and credit score.
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