Your credit score can impact you in a number of different ways. It will affect the interest rate you pay on your mortgage, your insurance premiums, as well as the cost of consumer loans. Having a clear understanding of credit scores and knowing how to achieve the highest rating possible can help save you tens of thousands of dollars in the long run.
A credit score is a number that helps lenders determine how likely you are to make your proposed monthly payments on time.
A FICO score on a mortgage credit report will range from 300-850, and is made up of the following:
35% of the Score is Based Upon Your Payment History
a. This considers past due accounts, collections, judgments, bankruptcies, etc.
b. The more recent any adverse credit is, the greater the impact to the score
c. The number of accounts that have been paid as agreedCredit score pie chart
30% of the Score is Based on the Amounts Owed
a. The number of accounts with balances
b. The proration of balances to the total credit limit of revolving accounts
c. The total amount owing on specific accounts
15% of the Score is Based on the Length of Credit History
a. Time since accounts opened and most recently used
10% of the Score is Based on New Credit and Inquiries
a. The number of recently opened accounts and number of inquiries
of your credit
10% of the Score is Based on the Types of Credit Used
a. The number of various types of accounts (revolving, mortgage, installment, etc)
Credit scores change moment by moment as balances and other information is updated to the credit bureaus. By understanding the factors that determine your score, you can take specific actions that will help ensure the highest possible score. For a free credit review, contact us.