If you’re in the market for a new home, it’s important to know your credit score. A good credit score can lead to a better interest rate on your mortgage, while a lower score might present some extra challenges. Are you feeling the need to improve your score? Here are a few things you can […]
If you’re in the market for a new home, it’s important to know your credit score. A good credit score can lead to a better interest rate on your mortgage, while a lower score might present some extra challenges. Are you feeling the need to improve your score? Here are a few things you can do before you start house-hunting.
Good credit can take time to build, but regularly reviewing your information and working to rectify past errors will put you in the best possible position when it comes to getting an optimal interest rate on your mortgage.
What factors affect my credit score?
This one is relatively simple. If you make your credit card and loan payments on time, this tends to help your credit score. If you have late payments, your credit score will be lower. History and trends matter. A late payment will always lower your score, but if you have a history of on-time payments, it may not affect your score as much as it would for someone who is consistently late. On the other hand, it may take longer for someone who is typically late to build up their score with on-time payments. Late payments, collections and charge-offs are also lumped into this category. Payment history accounts for 35% of the formula; your credit utilization refers to how much credit you’re using.
Representing 30% of the formula, your credit utilization refers to how much credit you’re using compared to your monthly limits. For example, if you have a credit card balance of $250 and your credit limit is $1,000, you’re utilizing 25% of your available credit.
The credit bureaus also consider the length of your credit history, which makes up 15% of your total score. This is measured from the time you open up a credit card or close on a car loan or mortgage. The idea here is that the longer you have your accounts open, the more you can prove or demonstrate that you’ve been responsible with credit. You don’t have to have four credit cards, plus a car loan and a student loan in order to get a mortgage, bust a long history of sound financial responsibility can only help.
Credit inquiries make up 10% of your score. If you’re applying for a mortgage, its not a good idea to apply for three new credit cards and a car loan at the same time. This is because credit companies want to know that you’re not overextending yourself with credit. For this reason, each hard inquiry made at the time of application my temporarily knock down your score a little bit.
Your mix of credit accounts for the final 10% of the credit score formula. For creditors, this is all about knowing that you can handle various different types of credit, including both revolving accounts like credit cards and installment loans like a mortgage, student or personal loans.
4 Tips for Improving Your Credit!
/0 Comments/in Blog /by stryder9If you’re in the market for a new home, it’s important to know your credit score. A good credit score can lead to a better interest rate on your mortgage, while a lower score might present some extra challenges. Are you feeling the need to improve your score? Here are a few things you can […]