Your credit score is a rating used by lenders to qualify you for a credit card, loan, or service. Your score is used to estimate risk, ability to pay and is based on your history. The higher the score, the better. 600-650 on up to 850 is the good to best range you are looking for.
There are many factors, but are 7 main points that will affect your Credit Score that matter. These are mathematical formulas that determine your score and then factors are weighted on importance.
- Accounts in use. Credit accounts are 10% of your score. Too many open accounts can lower your score, however, active use and payments matter too in this regard. Too few accounts can effect your score as well. Also don’t worry if you have old accounts that are not in use. Sometimes if you close them it can effect you more than if you just left them alone.
- New Accounts. Opening several accounts in a short amount of time, same as above, can drop your score as well. Higher scores are rewarding your consistent history over time. You can open accounts, but definitely understand that if you go out and finance/buy a car it will affect your credit score and can effect your ability to purchase a home.
- Payment history. Public records and payment history is related to 35% of your score! That’s a large percentage so, paying at least your minimum and on time is good, however, more than the minimum is better and of course, in-full is best! It also helps your score to keep your balance lower in relation to the credit limit. Keep your cards under 50% of the credit limit, and under 25% is better. If you are close to the maximum it will lower your score.
- Public records. This would include, but is not limited to, bankruptcies, judgements and collection items. These are standard questions most of the time when applying for credit. Since this public record, do not try to conceal or deny it on applications. Just because you had something happen in your past it doesn’t mean that you can’t purchase a home. There are many options that could work for you as a buyer. Our experts will help you with this.
- Length of credit history. What does this mean? Keeping it simple, it means that longer credit history can bump your credit score positively showing consistency and experience to pay and improve as well. This is about 15% of your score. It’s like experience, the more you have, the more an employer may want to hire you versus someone fresh out of school. Keep a credit card open on your account even if you don’t use it. It will show a good history.
- Every time a lender, landlord or insurer has to pull your credit, this is recorded on your history. Too many pulls can lower your score and is about 10% of your score. You should not have this done while applying and on up to closing on a house. If you are purchasing a home, car, etc., the pulls related to the same purchase only count as one.
- No quick fixes. Unfortunately, you cannot quickly increase a credit score so, maintaining your payments in a timely fashion or calling to make a payment plan and keeping it, can help. Sometimes there are false reports and inaccurate information on your report. You would want to periodically check on your credit, prove false and clean up your records. Keeping good records on file, for the minimum in your state, is helpful in these situations. Many credit cards now offer free credit tracking. Use the service. It will help you to see how you are improving over time.
Four Sale Real Estate has partners that can look at your credit and if needed work with you to make a plan to improve your score. It will have steps and a time-frame that will show marked improvement if followed. Many buyers have been approved after improving their scores. A higher credit score can also lower your interest rate for your home purchase. Our lender partners will be able to go over these details and create a plan for you to be able to afford your dream home. Contact Four Sale Real Estate and we will help you find your new home.