Credit Score
There are 3 credit bureaus that issue your
credit scores.
The credit bureaus are Experian,
Equifax, and Trans Union.
You are not required to have a 700 credit score to qualify for a home loan. Some home loan programs will go down to a 500 credit score with a 10% down payment and be approved.
Breaking Down Your Credit Score
Your Credit Score is determind by 5 factors of differing importance:
Payment history is 35% of your credit score.
Make sure to make all payments on time. If you receive a 30 day or longer late payment on your credit it can significantly drop your credit score and will remain on your credit report for 7 years even after you have brought the late payment current.
Credit usage is 30% of your credit score.
Keep your credit balances at 30% of your credit limits or lower, under 10% keeps your credit scores high and gets the lowest interest rates.
The lower your credit usage, the higher your credit score will be.
The lower your credit usage, the higher your credit score will be.
Credit Age is 15% of your credit score.
Age of credit history refers to the length of time your accounts have been open. By keeping your average credit accounts open for 5 years or longer, you are showing mortgage lenders you can be responsible with credit. Do not close your credit cards even if you are no longer using them. Closing your credit cards will drop your credit scores and drop the length of your credit history.
Type of credit is 10% of your credit score.
Mortgage lenders like to see a variety of accounts (credit cards, auto loans, personal loans, student loans, home loans etc.)
You want to have at least 3-5 different accounts that you use and pay back responsibly.
You want to have at least 3-5 different accounts that you use and pay back responsibly.
New credit is 10% of your credit score.
To keep your credit scores high limit your credit inquiries to 2 inquires or less per year.