Photo: Robert Clark
New York metro area homeowners can potentially save nearly $50,000 by boosting their credit score 50 points, according to a report released last week by personal finance tech company SmartAsset.
Homes have a median value of $414,000 in the New York metro area. Based on an average credit score of 686, which is considered “fair” by the credit reporting agency Experian, New Yorkers would be paying a mortgage rate of about 4.44 percent.
Over the course of a 30-year mortgage, that adds up to $336,029 in interest, says SmartAsset.
However, by boosting their credit score 50 points, homeowners may be approved for a rate of 3.87 percent, lowering interest paid to $286,457 — nearly $50,000 in savings over the term of the mortgage.
The top 10 cities where homeowners could save the most by boosting their credit scores included many of the country’s hottest housing markets: San Francisco, CA, Honolulu, HI, Los Angeles, CA, Boston, MA, and Seattle, WA.
A 50 point increase in homeowner’s credit score added up to an average savings of nearly $60,000 across the top 10 metros.
In San Francisco, arguably the country’s most expensive housing market, homeowners could potentially save over $85,000 by boosting their credit score.
And while the savings are greater in the bigger cities that made the top 10 list, homeowners in smaller metro areas can still save a substantial amount relative to their home’s value and their income, says SmartAsset.
Homeowners should run a credit report to look for any errors, and dispute any inaccuracies.
“Paying your monthly bills on time can have the biggest impact on your credit score. If you have trouble with this, set up reminders or automatic bill payments,” AJ Smith, SmartAsset’s VP of Financial Education, tells BuzzBuzzNews.
Checking debt-to-credit ratio can also help boost credit scores. Ideally, the amount of debt carried should be between 20 percent and 25 percent less than the credit you carry, Smith advises.
“As your balances decrease, your credit utilization ratio becomes more favorable and ultimately you should see an increase in your credit score,” Smith tells BuzzBuzzNews.
There’s no magic bullet for fixing a credit score overnight, but the one sure-fire thing a homeowner can do to start boosting their score is to pay their bills on time.
“Payment history makes up the largest chunk of your credit score, 35 percent, so paying punctually, even if it’s just the minimum balance initially, can help to boost your score,” Smith tells BuzzBuzzNews.
The good news for those homeowners who may have be tardy with some of their bills is that even lateness washes off credit reports over time. The key is to have as few delinquent accounts as possible, as the negative effect compounds with more late accounts.
To make its calculations, SmartAsset examined 199 metro areas, specifically looking at median home value from Census data, resident’s average credit score from Experian and estimated mortgage rates for credit scores from MyFico.com.
SmartAsset then made estimates based on credit score increases to rank metro areas.
Click here to read the entire report.