Uncategorized May 18, 2015

And the [credit] scores on the doors are…

Chances are if you own a house, or are buying a house, you have or need a mortgage.  And kudos to you if you don't!  If you're seeking a mortgage, the first thing a lender will do is pull your credit score.  And the higher your score, the more investors and lower interest rates you'll have access to.

FICO credit scores range between 350 and 850, with 850 being the very best score you can get. If you have a score of 680 or below, there's work to be done to bringthis up above700 — and if you’re score is even lower than that, you might be feeling hopeless. 

Here are some key points about what makes up your FICO credit score:

  • 35% is based on your payment history for all accounts
  • 30% is based on the amount you owe, especially revolving accounts
  • 15% is based on how long you've been using credit
  • 10% is based on your applications for new credit
  • 10% is based on types of credit used

The good news is that if you have a lower-than-you'd-like credit score there are some things you can do to improve this. The even better news is that some of these simple steps can boost your score by as much as 40-50.  That's enough to open the gates to many more investors and a far lower rate of interest.

How to improve your credit score:

  • Pay active past due accounts to a current status
  • Pay down outstanding revloving debt as close to zero as possible.  If you are unable to pay off accounts completely, them pay them below 30% of the credit limit
  • Request deletion letters for any derogatory information that does not belong to you
  • Don't be in a hurry to close existing accounts. This may affect the length of credit history and lower the credit score
  • Do not open numerous accounts prior to loan funding

There are many urban myths about how you can hurt, vs improve your credit score.  Here are 7 myths that will not lower your credit score – http://www.gobankingrates.com/personal-finance/7-credit-myths-thought-could-hurt-score-but-dont/