5 Factors That Effect Your Credit Score
Your credit score is one factor that will control a big portion of your life. That little three digit number that can cost you money or save you money. Needless to say, it is very important that you understand what factors go into how the credit bureaus decide what your credit score will be.
There are three main credit reporting agencies: TransUnion, Experian, and Equifax. Your credit score is a reflection of your debt and payment history.
Here are five things that will affect your credit score.
1. A variety of credit. Creditors want to see that you have a history of different types of credit. Such as credit cards, installment loans, and mortgages.
2. How much debt you have. The more debt you have the more of a risk you are to a lender. Therefore, always try to pay down or pay off your debt to make yourself less of a risk to a lender. This will make it easier for them to approve your loan and offer you a lower interest rate.
3. What is your payment history. It is very important that you pay all of your bills on time. This means everything from your utility bills to your credit cards. Everything! Late payments will lower your credit score.
4. How old is your current credit. Whatever you do – do not open any new lines of credit, no matter how small they are, if you are getting ready to start looking for a home. If you do, this tells a lender that you may be spending too much, too fast and they will lower your credit score and will more than likely give you a higher interest rate.
5. How long have you had credit. Age matters when it comes to credit. Younger buyers are at a disadvantage because their credit history is shorter. The longer your credit history is the better. This gives the lender a better idea of how you handle your money and your debt and whether or not you historically pay your bills on time.
It is important that you check your credit reports throughout the year. You will need to make sure that everything is accurate and that there is nothing there that does not belong.
If there are issues with your credit report, this will give you some time to correct or improve things before you attempt to buy a house.
Talk to your realtor about what you can do to improve your credit score and exactly what you will need in order to qualify for a home loan. Your realtor will be able to refer you to a reputable mortgage lender, thereby making the whole process much easier.
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About the Author: Millie Gil has been a successful Licensed Real Estate agent for over 25 years in Florida. Millie is Vice President of Bold Real Estate Group, a boutique agency committed to concierge personalized service for discerning buyers, sellers and renters of residential and commercial properties. Millie is fluent in English and Spanish with a strong network of real estate professionals worldwide. Other post by Millie Gil