How will your credit score determine whether you qualify for a home mortgage?
Added on: 11/23/2008 3:06:43 AM
by: Anna C. Dougherty
How can I raise my credit score? My credit isn't excellent, can I get a mortgage?
What is in a credit score?
The three reporting agencies, Equifax, Experian and TransUnion will use either a FICO score, which is between 300 and 850; or a VantageScore, which is between 501 and 990 to determine your credit score. A credit score gives lenders quick insight into how you have managed your finances in the past. Your credit score may include such information as:
Lenders do consider more than simply your credit score.
Your credit score is a portion of the information that lenders review when you apply for a mortgage. In addition to your credit score, lenders also review your employment history, income, collateral, assets and your overall credit history.
How can I raise my credit score?
There are two pieces of information that account for 65% of your total score:
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Payment History (35% of credit score) — your payment history is determined from your payment patterns to creditors or lenders. This component of the score is basically a reflection of how frequently you pay your bills or loans back on time.
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Outstanding Debt (30% of credit score) — the second major factor is how much debt you have outstanding. The more debt you have outstanding, relative to what creditors think you can financially handle, the lower your credit score.
It can take time to raise your score, but it will be well worth the wait. A few things that can help your score move-up:
- Pay your bills on-time
- Keep your credit account balances, as a percent of credit available, low
- Start to pay down and pay off your debt
- Avoid opening a lot of new accounts in a short time-frame
Get your score before you apply for a mortgage.
Get a copy of your credit report and review your credit history. You can get a free report from a variety of services—and most are available online. Once you get your report, you will want to review it for any errors and start to analyze what you can do to strengthen your credit score.
Effective June 1, 2005, consumers in 11 Southern states (including Georgia) are eligible to request a free comprehensive disclosure of all the information in their credit file from all three national reporting agencies once every 12 months. To receive this free report, you must go to a single central source,
www.annualcreditreport.com (where you can view an online copy) or call the central request line, 877-322-8228.
My credit isn't excellent. Can I get a mortgage?
Many people move forward with getting a mortgage before their credit score reaches a FICO score of 700, which is generally considered a "good credit" score for many lenders. While the FICO national average credit score is 680, only 13% of the nation's population has scores above 800 and roughly 15% of the population has a credit score lower than 550. In general, a good credit score is anything above 700 with FICO and 801 with VantageScore
One of the main reasons you want to have a good score is so you can secure the best possible interest rate for a mortgage.
Contact your local Smith, Welch & Brittain office for referrals to local lending institutions who offer special products for first time homebuyers, homebuyers with limited employment history, homebuyers with limited or alternative credit histories, or homebuyers with concerns about qualifying income.
Keywords: credit, score, mortgage, stockbridge, mcdonough, attorney, henry, county, georgia, fico, equifax, experian, transunion
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