Have you ever wondered what changes affect your credit score?
One of the first things your lender will ask you when you
apply for mortgage is, “What is your credit score?” This is a very important factor that helps
determine your qualifications for a mortgage. The higher the score, the better off
you are when it comes to securing a good rate.
There are five basic factors that are used to calculate your
credit score. The calculation is as follows: payment history (35%), debt to
credit ratio (30%), length of credit history (15%), mix of credit (10%) and new
credit (10%).
Here is a breakdown of each piece:
Payment History
This includes making payments on time for
credit cards and other loans. This carries the most weight on your credit score
and one or two late payments can decrease your score more than you might think.
Try to pay every bill on time.
Debt to Credit Ratio
This piece relates to
your credit cards. The amount of debt that you hold on your credit card is
divided by the credit limit on the particular card. So the recommended ratio
should be less than 30%. Do not max out your credit cards on a regular basis
because your credit score will be lowered. Paying your balance, or keeping it
as low as possible is key.
Credit History
It’s important to show that you have a solid history of
getting credit and keeping credit. The longer your history is the better your
credit score. If you have accounts that have zero balances you should still
consider keeping them open as this will also increase your credit score.
Mix of credit
Lenders also look to see that you can maintain a variety of
types of credit accounts. This includes retail accounts, credit cards, mortgage
and car loans.
New credit
Every time you
attempt to open a new credit card it will affect your credit whether or not you
get approved. Each attempt could lower
your score 5 points. Try only opening one card at a time to keep your score
high.
If you are in the market for a new mortgage your lender will
look at a variety of factors determine to determine your interest rate. The credit
score is a large factor in that determination. Properly maintain your credit
score so that you can be on your way to owning your dream home. For all of your
real estate needs contact the experienced professionals at Tampa Bay Realty andInvestment Group. Call 813-515-4882
