Credit Score

Your credit score will likely affect what kind of loan you can obtain, and how much that mortgage will cost you.

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In this article, we will review the impact of your credit score, what affects your credit score, and where your credit score comes from.

Your Activity That Harms Your Score
* Missing a bill payment – This can be reported and listed on your credit report, and your score will take a hit. Make all your bill payments, on time!
* Late payment(s) – This, too, can be reported and listed on your credit report, and your credit score will take a hit. Guess what you should always do – Pay your bills on time!
* Carrying Too Much Debt – Having too much debt relative to available credit will also cause your score to take a hit. Plus, if a lender views you as having too high a debt ratio, if they’re smart lenders, you will be seen as high-risk, resulting in either a denial of a loan or unfavorable terms. Our advice, pay down your debt.

Typical Weights Determining Your Credit Score

Remember, each credit reporting agency’s scores will vary, but the following is a general guide to how five basic categories are weighted in determining your credit score.

1. Payment History = approximately 35% of score
2. Debt Amount = approximately 30% of score
3. Credit History Length = approximately 15% of score
4. Newly Received Credit = approximately 10% of score
5. Other Minor Factors = approximately 10% of score (Example: Having a mix of credit types)

You may download a good summary booklet regarding your credit score here.

Your Very First StepKnow your credit score

Before you start doing anything about your credit, you need to have a good idea about your credit rating, your credit score. Each credit reporting agency calculates your credit score, and each one will probably have a different score for you. This difference in scoring has to do with variations in the credit history reported to each agency and also their individual formulas used in creating the score.

Most banks and credit card issuers now will provide your FICO score, which is considered your true credit score.

There are services that also provide a non-FICO score, which can be helpful in monitoring your credit score over time. One such well-known service is CreditKarma.

Speak to your mortgage broker or lender early – EARLY – in your home buying process. They can help guide you in obtaining your true FICO credit score.

Horizon Home Mortgage can guide you with credit reporting agencies

Get Your Credit Reports
Free credit reports do not include your FICO credit score, but it is essential you obtain these regularly and review them for any errors or omissions, plus to see if any strange activity has taken place.

You’re are entitled to one free copy of your credit report every year from the three major credit reporting agencies. Those agencies are Experian, Equifax, and TransUnion.

Why Your Credit Score Matters
Besides determining whether or not you can obtain a loan, a strong credit score will position you to receive terms and rates that will save you money, and if we are discussing a home mortgage, those savings can be significant – Like thousands of dollars over the life of the loan.

Credit Score Ranges
* 800+ EXCEPTIONAL!
* 740 – 799 VERY GOOD!
* 670 – 739 Good!
* 580 – 669 Fair
* 579- poor (better work on your credit score ASAP!)

Experian offers a pretty nice infographic and informaton about credit scores. You can check it out here.

Tips
* Understanding codes on your credit score disclosure – Visit ReasonCode.org. The site will let you enter a code found on your report and provide you with a simple explanation of its meaning.
* Improve your credit score by:
– Fixing errors on your credit reports
– Paying off small debts
– Make multiple payments each month
– Pay each and every bill on time
– Pay more than the minimums
– Get a credit card if you have little to no history, and use it responsibly!
– Keep a small, small balance on your credit card(s)
* Get more resource like a free credit report guide or “Steps to improve your score“.


If you read our previous “Mortgage Basics” articles, you are well on your way to having a strong basic understanding of the mortgage industry. If this is the first time visiting our blog and you want to dive into mortgage basics, start with our first article in the series titled, “Mortgage Basics – Part 1“.


If you are in Connecticut or Massachusetts, and in the market for a new home, contact us and let’s review your options. As a mortgage broker, we have access to a wide range of mortgage products and can find one that works for your unique situation.

Use our Quick Quote form on our homepage or our Get Started form. Call us at (860) 285-0635 or email Mark or Samir (MHarrington@HorizonHomeMtg.com / SDoshi@HorizonHomeMtg.com), and we will connect you with any of our friendly, experienced team members.

“Your Mortgage Partner for Life”


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Copyright ©2001-2010 Fair Isaac Corporation. All rights reserved. FICO® is a registered trademark of Fair Isaac Corporation. Many factors affect your FICO® scores and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history or credit rating.