There are 3 types of lenders who check your credit score before loaning you money and giving you a particular interest rate – auto dealers, credit card companies, and mortgage lenders. Insurance companies and landlords or property management companies may also do this to determine how responsible you are from a financial perspective when issuing you a policy or before renting to you. However, what most people don’t realize is that there are 5 key factors that count towards your credit score including:
Factors You Should Know That Impact Your Credit
- Credit utilization or total amounts you owe (30%) – this is a measurement of the amount of debt you have compared to your available credit and is the second most important factor contributing to your credit score. This takes into consideration how much of your available credit that’s been used, how much you owe on auto loans, credit cards, home mortgages, and installment accounts.
- Length of your credit history (15%) – this takes into account how long you’ve had credit and been using it, the average age of your accounts, and how old your oldest account is. A long, relatively unmarred credit history can be helpful. However, a short history can suffice as long as you don’t owe too much and have made all your payments on time.
- New credit (10%) – your FICO score takes into consideration the amount of new credit you have and looks at the number new accounts you’ve applied for as well as the last time a new account was opened in your name.
- Payment history (35%) – as the single most important component, your payment history reflects whether or not you can be trusted to repay a home loan and considers the following factors:
- Do you have any bankruptcies, charge-offs, debt settlements, foreclosures, lawsuits, liens, public judgments, or wage attachments/garnishments against you?
- Have you had any accounts sent to collections?
- Have you paid your bills on time? If not, how late have you been?
Other factors include the frequency of missed payments and the amount of time since your last negative event.
- Types of credit currently being used (10%) – the final factor is determining whether you have different types of credit (e.g., credit cards, installment loans, mortgages, etc.) and the number of these accounts that you currently have.
Contact a Financial Experts With H.O.M.E. Lending Today!
Although your credit history and score are extremely important when you’re applying for a home loan and want the best interest rate, managing your credit responsibly is what lenders want to see. If you are confused or need guidance, call H.O.M.E. Lending today at (209) 477-0262. Our financial experts and business representatives are here for your assistance. Call now.
