Timely Mortgage Payments Can Help Your Credit

Tools & CalculatorsTaking out a mortgage is a big deal, credit-wise. Not only will your mortgage interest rate be determined in large part by your current credit scores, but your future credit scores will be determined in large part by how well you manage your monthly mortgage payments. That's why a Mortgage Payment Calculator, like the one provided below, is so valuable. It can help you figure out how much you can afford to pay each month, allowing you to make a wise, informed house-buying — and mortgage-application — decision.

Credit scores are such huge factors in credit-based decisions, like mortgages, that it should almost be mandatory that you know what your credit scores are — and how they're determined — before you even start looking at potential new homes. After all, your credit scores will determine your mortgage interest rate, which makes up a big chunk of your mortgage payments, especially in the first few years of paying off your mortgage. Overestimating your ability to make monthly mortgage payments can leave you in the red for years to come, which can cost you thousands of dollars (or more) in interest payments alone on credit cards and other loans.

Here's a quick primer on how credit scores are calculated:

  • Payment history (35%) — Your record of on-time, delinquent, or missed payments on credit cards, mortgages, auto loans, student loans, and other lines of credit over the years, as well as accounts handed over to collection companies, plus any bankruptcy filings and/or liens against you

  • Amounts owed (30%) — Your total outstanding balances on current loans and credit cards, as well as your ratio of credit used to the total amount of credit available to you

  • Length of credit history (15%) — How long your current credit accounts have been open

  • New credit (10%) — The number of credit accounts you've opened recently

  • Types of credit used (10%) — How many different credit accounts you have, including credit cards, store cards, various loans, home equity lines of credit (HELOCs), and others

The percentages shown above are general estimates of how strong an influence each of the above factors will be on your credit scores. Lenders will look at the information in your credit reports in total to measure your specific risk as a borrower.

All the same, because it counts as about one-third of the overall score, your payment history is clearly the most important factor in determining your credit scores. Your mortgage payments will therefore be a critical aspect of your credit scores in the future, so it's paramount that you figure out exactly how much you can afford to pay each month to successfully meet your mortgage commitment.

Your monthly payments can go beyond the mortgage payment itself to include homeowner's insurance, private mortgage insurance (PMI, which is typically required if your down payment is less than 20% of the final sale's cost), and property/real estate taxes in your town. When using our Mortgage Payment Calculator, you'll want to include these costs, as applicable, to determine your overall monthly payments.

Paying off a home loan with on-time monthly mortgage payments can help open other doors for you financially. Before you start scouting houses, though, be sure to check your credit scores, use our Mortgage Payment Calculator to determine what sort of home you can realistically afford, and then create a payment schedule to figure out just how big a mortgage you can comfortably manage in the coming years.

Mortgage loan amount:
Annual interest rate (APR):
Mortgage loan term (# years):
Annual real estate taxes:
Annual homeowners insurance:
Monthly PMI (Private Mortgage Insurance):
Monthly Principal and Interest Payment:
Monthly Taxes, Insurance and PMI payment:
Total monthly mortgage payment:

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