Understanding Credit Scores
Credit is a vital component in any mortgage approval process and understanding credit scores is important for a homebuyer. There are a number of different aspects that lenders look at while determining an applicant’s credit-worthiness. They check all these factors to understand what the credit risk of a particular applicant.
At times, giving an individual home mortgage with a bad credit score may not be a wise decision. Even a slight dip your credit score can impact the type of loan program you may be offered, the down payment requirements, interest rates and flexibility on income. Payment history and the amount owed have the greatest impact on a credit score and this is why it is important:
- That you pay all your bills on time
- Keep debt at a minimum
- Do not move your funds around too much
- Keep installment loans to a minimum
Credit Scores- The Determining Factors
If you consistently follow these basic guidelines, it is possible to maintain and improve your credit scores. In turn, this improves your loan potential and will help gain a lower interest rate. Key factors that impact your credit score:
- Payment History
- Amount You Owe in Comparison to Balances
- Length of Credit History
- Mix of Credit
- New Credit Applications
Things You Can Do
Initially, a number of factors can be utilized to establish credit. This includes employment history, bank accounts, utility bills and residence history. Though utility bills don’t get directly reported to the credit bureaus, they can show the lender any risk that is associated with the borrower.
It is important to have a healthy bank account history, if you are applying for a first time loan. Initially, you can establish credit through a bank in which your credit card is directly-linked to the amount of money that is deposited in the account. If you do not have a very strong credit, you may still be eligible for other options for a mortgage loan if you have a poor credit score. For more information, contact Mortgages Done Right Inc. at (561)777-7622.