Your credit score is a number between 300 and 850 that describes creditworthiness, or how likely you are to repay your debts. Lenders or creditors use this score to decide how safe it is to lend someone money.
The following factors are used to determine your credit score:
Do you pay your bills on time?
If you have late payments, had an account sent to a collection agency, or have declared bankruptcy, this will have a negative impact on your credit score.
What is your outstanding debt?
The three leading credit bureaus, TransUnion, Equifax, and Experian, look at how close you are to your credit limit (i.e., are you “maxing out” your credit cards). If the amount you owe is close to your limit, it is likely to have a negative impact.
How long is your credit history?
In other words, how long have you had credit accounts open? A short history can have a negative impact, but it can be offset by on-time payments and low balances.
Have you applied for new credit recently?
Applying for too many accounts within a short time period can negatively affect your score.
How many and what types of credit accounts do you have?
The credit bureaus consider the number and type of accounts you have. A mix of installment loans — such as an auto loan — and credit cards may improve your score. Too many finance company accounts or too many credit cards could possibly hurt your score.
Keeping your credit score healthy affects more than your mortgage these days. If you need to improve your credit score in order to reach your goals, I can refer you to local resources that provide credit counseling*, or sit down with you to discuss your eligibility to apply for a home loan. Let’s get you ready to become a homeowner!
*We are not a credit counseling or financial advisement firm. This information is for educational purposes only and is not to be taken as guidelines or guarantees to improve your credit or financial situation.