The Key to Your Credit Score
When it comes to purchasing a home there are few people that can afford to buy it outright while the rest of us are forced to rely on banks and lending institutions for some sort of mortgage. There are a number of factors lender's consider when qualifying you for a mortgage and one of the more important factor's is your credit score.
Your credit score is a three digit number between 300 and 850 derived from a point or scoring system called FICO. Ultimately the higher your credit score the better your credit and the more likely you will qualify for your purchase. Your FICO score is determined by a formula that factors in the following information.
- 35% of your score is determined by your payment history.
Are you paying your bills and are your payments on time? How many times have you paid your bills late and how late were they? Have any of your bills been sent to collections?
- 30% of your score is based on the amount of outstanding debt you have. The more debt you have the lower your score will be.
- 15% of your score is determined by the length of time of you have had the credit.
- 10% of your score is based on the number of times people have inquired about your credit
- 10% of your score is determined by the types of credit you have
Before applying for credit it is important that you are aware of what is in your credit report on the chance that there are any inaccuracies that might affect your score. You want your credit report to reflect the most recent credit activity available. There are currently three national credit bureaus that have their own scoring system based on the FICO system and you can pull your credit report from any/all of the following:
All credit bureau websites have extensive information about how the scoring system works, how to read your report and identify any inaccuracies.
It's a good idea if you plan to purchase a home, or make any large purchase, to stay on top of your credit and review your report regularly.
