5 Factors That Affect your Credit Score

Looking to purchase a home?  Your credit score is a crucial part of the transaction!  It will help determine what kind of financing  you’re able to secure, the interest rate you qualify for, and even if you can qualify for a loan at all!  And it’s not just for buying a home!  Insurance companies look at that score.  If you’re looking to lease, landlords consider your credit score as well.

This number is important so you need to take good care of it and protect it!  Scores range between 200 and 800.  The higher the number, the better your score!  620 is the “magic number”!  That’s the minimum most lenders want to see to qualify you for a mortgage!

Here are 5 things that can affect your score–positively or negatively.  Be mindful of:

1. Your payment history!  You must pay your bills on time!  Late payments, bankruptcy filing, liens, collection activity all show up on  your credit report and can impact your score in a negative way.

2. How much you owe.  And also the ratio of debt to available credit.  If you owe a lot on several accounts, you may be overextended and lenders may not want to lend to you.  But if you have a small ratio of debt to overall available credit (and make your payments on time!), that’s a good thing!

3. The length of your credit history.  Your lender and/or your realtor may have told you not to go open new accounts while you’re trying to obtain mortgage financing.  Lenders like to see a history, and the longer the better–it shows that you can manage your debts.

4.  New credit.  Multiple new accounts opened within the last couple of years will impact your score–and not in a good way!  Remember, lenders want to see some history and evidence that you can manage your payments.

5. The type of credit you use.  There are different kinds of credit and in general, it’s good to have evidence of more than one type–installment loans, credit cards, a mortgage.  Again, lenders want to see that you can take care of your debt and your obligations.
You are entitled to a free copy of your credit report every year from each of the 3 credit reporting agencies–Experian, TransUnion, and Equifax.  It’s a good idea to obtain those reports, check them, and report anything that’s not accurate to the agency.  That’s also a good way to find out if someone is opening accounts in your name!

Your credit score can make a huge difference when you buy a home, a car, insurance, furniture, anything that requires you to take out a loan.  Stay on top of your score and save yourself some $$!