Do You Know Your Credit Score?

Whether you are thinking about a large purchase (like a home or a car) or not, it's always important to keep an eye on your credit score. Credit Scores range from 300-850 with those coming in over 700 being good to excellent and those under 700 ranging from fair to bad. Below are factors that impact your score:

Payment History - Accounting for about 35% of your score, it is essential that you pay your bills on time. Automatic payments can be set up if you have trouble tracking due dates.

Used Credit vs. Available Credit - The second most impactful thing affecting your score is how much you owe compared to your credit limits. Accounting for about 30% of your score, coincidentally it is recommended that you owe no more than 30% of the total amount available to you with 10% being ideal.

Type of Credit Used - Revolving debt (like credit cards) and installment loans (mortgage, home equity, auto, personal and student loans) are reviewed as well, accounting for about 15% of your score. Creditors want to see that you can manage different types of accounts.

New Credit - Requests for credit (applying for a credit card or auto loan), also known as "hard pulls" impact your score approximately 10-15%. Though this is a smaller percentage, it is rarely a good idea to take out a new line of credit when you are in the process of getting a mortgage. Pulling your own credit score (you should never have to pay for this!) and inquiries by creditors to preapprove you for offers do not count against you. These are referred to as "soft pulls".

Length of Credit History - A lender wants to see that you've been able to manage the use of credit over a period of time. This part of the calculation includes a look at how long both your oldest and most recent accounts have been open. This accounts for about 5-10% of your score. Generally speaking, it is not good to close old credit cards when you are in the process of (or thinking about) a large purchase, especially those that you have had for a while.

Thinking about buying a home and wondering what you can qualify for based on your situation? Contact us. We would love to help!