Mortgage Planners work to help customers get the best rate possible when they borrow money. Often people are unaware of factors that can affect their ability to get the best rate. Having a less than perfect credit score can stand in the way of you obtaining the best mortgage rates.
It may not occur to you how much your current credit situation can interfere with your life. Having credit cards with high balances, missing occasional payments and having too many credit cards can all affect your FICO credit score.
A FICO score ranges from 300 to 900. It is a way for borrowers to assess how much of risk you would be if they were to lend you money. It is determined primarily by five factors, with some weighing more heavily than others.
What is your past payment history? This percentage accounts for approximately 35% of your credit score. Late payments, collections, bankruptcies and foreclosures, can be detrimental to your score. More importantly, is that the most recent blemishes on your credit as well as larger debts take precedence over past problems and smaller debts.
What is your current level of indebtedness? This accounts for approximately 30% of the score. This factor determines whether you are able to keep your debt under control.
Having too many credit cards or being near your credit limit can indicate to others that you may not be responsible managing credit. It can also indicate that you may have problems paying any debt you owe.
How long is your credit history? This accounts for about 15%. A long history of credit in good standing exemplifies a lower risk factor.
What is your track record in pursuing new credit? This factor accounts for 10% of the score. When you open several credit accounts in short span of time, this is deemed as a potential risk. Numerous credit inquiries for personal requests can also have a negative effect on your credit score. Although FICO scores usually differentiate between the inquiry being related to a loan rate comparison and an attempt to open a new credit card account.
What are the types of credit available? This accounts for 10% of your credit score. This takes into account how many different debts you have. It also takes into account whether you have many of the same types of debt, such as credit cards, or a mixture of different debts or loans. Having a combination of different types of credit and loans is seen as being more positive than just having debt on different credit cards.
People with 750 or higher credit scores have stellar credit scores and generally get the best deals on loans and low interest credit cards. This is because these score shows that they have managed to make payments on time. They are also not seen as a potential risk for the lender and are very responsible with debt.
Some tips to keep in mind when understanding your credit score is to look at your score as a whole, not just in parts. You can't determine your credit score based on one aspect, you have to take into account all of these factors.
Depending on what your past credit history is will determine the importance of certain factors that influence your credit score. One aspect of a person's credit score may not seem as important to another person with a different credit history. As time passes, so will your credit score. The importance is within the mixture of information within the credit report.
With the assistance of a seasoned mortgage lender you will have peace of mind knowing that someone is there to offer assistance and answer questions you may have in regards to your credit. They can help you achieve a better understanding of what you can do to improve your credit score. They can give you guidance to make sure you are headed in the right direction to repairing your credit.
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