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What makes up YOUR credit score?

June 26, 2014

1)     Payment History: This is the most important part of your credit score.   12 months without a 30 day late is optimal to get a good interest rate home loan.  Occasionally exceptions are made prior, but we would need some positive factors which will be addressed below.

2)     Amounts Owed:   If you have credit cards, you want to keep the amount charged to less than 33% of the maximum limit.   Example: $1000 credit card,  you do not want to charge more than $300.  If you charge $990, this account is “maxed” out and it is a danger signal to the credit reporting agencies.

3)     Length of Credit History:  Credit history is by definition a history of your credit, the longer this history, the more they have to grade you on.   

4)     New Credit:  Opening up a lot of new accounts is a danger signal, especially credit card accounts.   So try to keep these to a minimum unless you need these to build a credit profile.  If this is the case, you then have enough time for these accounts to not be new when you are ready to apply for a home loan.

5)     Types of Credit:  Mortgage loans, Auto Loans and a few installment loans are expected of most people.   When there are an abundance of revolving credit cards, then a danger signal is triggered in your credit score. 


All that being said your credit score is a very complex thing.   It is a combination of all five items above.  

 

I highly recommend you call your mortgage professional if you are thinking of doing any of the following:

 

1.     Opening a new account

2.     Paying off a collection (some really old collections are better off as they are, an unpaid 5 year old collection is better for your scores than a 1 day old PAID collection in most cases)

3.     Closing an account (it is rarely good for your scores to close an account)

4.     Getting a new job

 

This way they can give you the best advice to make sure you qualify for your home loan.

 

You can always call us at 866.295.9339 and speak with a mortgage banker that can go your credit with you.

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