Your credit score is a crucial part of the mortgage application process. It is important to make sure you are doing the right things to maintain a good credit score before and during the home buying process. Credit scores are determined by the level of creditworthiness a person holds. Someone with a higher credit score illustrates better credit decisions. Higher credit scores can make lenders more confident that you’ll repay your future debts. There are several factors that determine your credit score. Below we have outlined the five factors that make up your credit score. If you have any questions about how these factors affect your mortgage or refinance application, please contact our team!
Factors That Affect Your Credit Score:
35% – Payment History
Your payment history reflects on-time, missed, or late payments on credit cards, retail accounts, installment loans, mortgage loans, etc. Make sure you are paying your bills on-time or early!
30% – Amount Owed
This is the total amount of debt incurred through your credit accounts (i.e. student loans, auto loans, credit cards, etc.). If you acquire a bit of debt, that’s ok! Just be sure you can keep the payments under control.
10% – Credit Mix
Your credit score will reflect a combination of all credit accounts. While a healthy mix will improve your score, it is not necessary to have one of each.
15% – Length of Credit History
A short history isn’t bad if you show responsible credit management. Having a few credit accounts is much better than having no credit accounts at all. Don’t let your credit accounts get out of control!
10% – New Credit
Lots of new credit inquiries can lower your score. Mortgage and auto loan inquiries are an exception; these count as one inquiry within a 30-day period.
A single factor won’t tarnish your credit score entirely, but together they will all have an impact on the health of your credit in one way or another. If you have any questions on how your credit might affect your application, reach out to one of our team members today!