Credit scores aren’t as intimidating as they sound. Of course, that one three-digit number might make or break your borrowing experience, but knowledge is power. The more you know about credit scores, the more successful you’ll be when you’re applying for a home loan.
Even if you are clueless about credit scores, you probably already know that a high score puts you in a better position at the mortgage desk. If you’re like most people, that’s where your knowledge ends. No worries, because today we’re going to share a wealth of need-to-know info about this crucial part of your financial profile!
Credit Scores: What’s Good, Bad and Ugly
To calculate a credit score, specific information about your borrowing history is plugged into an algorithm, generating a three-digit number that falls between 300 and 850. There are a few different algorithms available, but no matter which one you look at, your credit score will be similar across the board.
What’s a good credit score? Here are the ranges:
- Excellent: 800 – 850
- Very good: 740 – 799
- Good: 670 – 739
- Fair: 580 – 669
- Poor: 300 – 579
What Affects My Credit Score?
Several factors go into your credit score calculation, and you can control most of them. Here are the biggies:
- Payment history: Pay your bills on time to see your credit score climb.
- Credit utilization: Use your credit, but don’t rely on it. If you constantly max out your available credit, your score will plummet.
- Credit diversity: A seasoned financial portfolio with various types of credit, such as credit cards, student loans and personal loans, shows that you can manage different types of debt.
- Amount of new credit: If you open several new credit accounts in a short period of time, red flags go up. To maximize your credit score, establish new credit gradually, and avoid doing so while you’re going through the mortgage process.
- Length of credit history: If you’ve successfully managed your credit accounts for years, you’ll be viewed as a responsible borrower and reap the rewards of a higher credit score.
Contact Us Today!
Are you suffering from credit score confusion? Contact MortgageDepot today to learn more about the role of your credit score at the mortgage desk!
Connect with one of our loan consultants for more information.
