| SOME IMPORTANT FACTS ABOUT CREDIT SCORES |
| Your credit score, also known as your FICO Score, plays an important role when you apply for a mortgage. As a homebuyer, you should know that having a good credit score plays a key role in the purchase process. Lenders check your credit score to determine if you will qualify for a home loan. Below are some important facts about credit scores you should know. If you have any questions about this information or any part of the home financing experience, please contact us! |
| What a credit score represents. Your credit score is a number that’s based on your payment history as recorded in your credit report. That detailed document shows how well you’ve paid off past debts, including credit cards, student loans, car loans, and wherever else you’ve made payments on money you’ve owed. Credit scores are calculated by and provided by three credit bureaus—Experian, Equifax, and TransUnion. The numbers may be different, but usually, all three scores are roughly the same. |
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| The factors that go into your credit score. Here are the main variables the three credit bureaus consider when calculating your credit score, along with their approximate importance expressed as a percentage: • Payment history, 35%–shows whether you make credit card and loan payments on time • Debt-to-credit utilization, 30%–the amount of debt on your credit accounts divided by your credit limit on those accounts; it works against you if your debt exceeds 30% of your credit limit • Credit history length, 15%–longer is better than shorter; ideally, you need at least six months of credit history to establish credit • Credit mix, 10%–your credit score rises if you have different types of credit accounts—for example, credit cards, car loans, student loans, etc. • New credit accounts, 10%–opening new credit accounts can raise your credit score because it can increase your debt-to-credit utilization, but it could lower your score because your average credit history length decreases when you open a new account |
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| The scores you need to get a mortgage. Credit scores range from 300 to a perfect 850. A good credit score is 700 and above, fair is 650-699, and low is 650 and under. The score you need to get a mortgage varies by the type of loan and the lender. When applying for a home loan, we will work with you to determine the best fit based on your needs and your credit score. |
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| Get a free credit report. You can get a free credit report from each of the three credit bureaus once a year at AnnualCreditReport.com. This is the only source for free credit reports and it’s authorized by federal law. Ask for your free annual report from one credit bureau at a time, so you get a fresh report every three months. Check that all the information is correct and up-to-date, and correct any errors. And be sure to check your credit score a few months before you start seriously shopping for a home. That’s because it will take some time if your score needs improving. Here are tips from FICO about repairing your credit and improving your FICO Scores. As always, we’re happy to help you with any of your home financing questions and needs. |
The Jim Passi Team at Citywide Home Loans proudly serves Illinois, Wisconsin, Michigan, Indiana, Georgia and Flordia. If you are looking to buy a home or refinance, we have you covered. Apply Now to get started.
