10/01/2013

Credit Scores

Credit Scores

       Credit scores are very important to everyone. You need a good credit score in order to finance a home, whether it is your first home or your retirement home. If your credit score isn't great, your expectations might have to be changed to find a home within your price range. Your credit score shows people what kind of credit history you have. Have you paid your bills on time? Do you have a lot of debt that you need to pay off? Can you afford another payment? A house payment is one of the larger payments we have over the course of our lives.
        The lender looks at your credit score and decides how much money can be loaned for the home you want. If the bank doesn’t think that you are capable of paying your loan, making your full monthly payments, and/or making your payments on time, you are most likely not going to qualify for a loan.



        The Fair Issac method is used to calculate your credit score.  Scores can range from 300-850. About 35% of your score is determined by your payment history. 30% is weighted toward the debt that you owe right now (school loans, car loans, etc.). 15% is the amount of time that you have had credit under your name. 10% is new credit. The last 10% is the type of credit that you have under your name right now.
The more credit you have that is different in all aspects, the better. You don’t want to have three different car loans, no school loans, and no home loan because you be viewed as having diversity in your credit. If you have one of each of these loans, your credit score will be higher because of the diversity.
        Most lenders also look at the money that you have sitting in the bank and how much you make at your current job. Another thing that they look at is how long you have been employed with your current employer.

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