Factors That Decide Your Credit Score
When you go to apply for a mortgage one of the first things
your lender will want to know is your credit score. Your credit score is a very
important factor that determines whether you can qualify for mortgage. It is
used to show lenders how financially responsible you are. A higher credit score
means that you are a less risky client whereas a lower score means that you may
have issues securing a great loan and rate.
First of all you should know exactly how the credit score is
calculated. The numbers on your credit report are calculated to create your
credit score. There are five pieces to this calculation: payment history (35%),
debt to credit ratio (30%), length of credit history (15%), mix of credit (10%
) and new credit(10%).
Payment history
Making payments for credit cards and other loans and bills
on time carry the most weight on your credit score. Even one late payment can
reduce your score. Therefore it's important to pay on time.
Debt to credit ratio
This is directly related to your credit cards. The amount of
debt that you have on your credit cards is divided by the credit limit on the
cards. The recommended ratio should be about 30%. If you are maxing out your
credit cards on a regular basis you are probably damaging your credit score.
Credit history
Lenders want to see that you have a history of getting and
keeping credit. The longer credit history you have, typically the better. Even
if you have accounts that have zero balances you should try to keep them open
as this will help your credit score.
Mix of credit
Having a variety of different types of credit accounts will
help your credit score. It's important to have credit cards, retail accounts,
car loans, and mortgage loans. Lenders want to see that you are able to
maintain a variety of credit types.
New credit
Each time you open or attempt to open a new credit card you
prompt an inquiry on your credit report. Every time this happens your credit
score can be lowered about five points. You should avoid opening multiple
credit cards at the same time as this will hurt your credit score.
When you are in the market for a mortgage your lender will
look at many pieces to determine the rate and type of mortgage you that are
available to you. Your credit score is a big factor in that determination. Be
sure that you know how to properly manage your credit score so that you can be
on your way owning your dream home. Want to find the right mortgage loan? or see if you qualify? Contact Florida Real Estate Loans today!
