When it comes to taking the next step in your life, one of the most important numbers could be your credit score. After all, it can stand in the way of some of the biggest purchases you may want to make, like a car or a house.
First the basics, five factors comprise your credit score
Not all debt is the same and some is considered ‘good’ according to Scott Smith, president of CreditRepair.com. “Any kinds of car loan, home loan…those things actually provide you great credit history when you pay them off on time and fill those debt obligations,” he said.
Even credit card debt isn’t “necessarily wrong” said the credit expert. But Smith warned “you don’t want to have more than 30% utilization on that (account) and you do want to pay it down as often as possible.”
Scott Smith gave his assessment on the three Do’s and Don’ts of improving your credit score.
How did the recession affect your spending habits? Soon, for better or worse, you might see your financial behavior reflected in your FICO score.
FICO, the data company that devised the credit-scoring formulas most often used by mortgage and auto lenders, credit card companies, etc., plans to release a new scoring model this summer that it promises will analyze credit risk more correctly.
FICO said the new model, the first major change in six years, is intended to address lenders’ concerns about credit score consistency across the three major credit bureaus.
A FICO spokesman told National Mortgage News that the new formula, called FICO Score9, will analyze post-recession data in terms of how a consumer’s spending and credit habits may have changed, compared with six years ago. Consumers whose scores were good pre-recession will score slightly better in the new version, he told the trade journal.
I found this article to be very helpful and realistic. Major point is to start with your loan officer…
If you have a credit score that’s considered fair, poor or even bad, you may be assuming that qualifying for a mortgage is out of the question. While that’s true for some would-be borrowers who need to improve their finances as well as their credit, there are some mortgage options for homebuyers with less than perfect credit.
Your Credit Profile
Mortgage lenders rely heavily on your credit score to evaluate your qualifications for a home loan because your score indicates how you have handled credit in the past, which serves as a predictor of your future repayment pattern. According to Credit.com, excellent credit gets a score of 750 or above; good credit, 700-749; fair, 650-699; poor, 600-649; and bad credit is a score under 600.
Rather than guess at your credit profile, you need to request your free credit report and pay a small fee to get your credit score from http://www.annualcreditreport.com. Fix any errors and take steps to improve your score with improved financial behavior before applying for a mortgage loan. A lender can help you determine which steps will boost your credit score fastest (to continue reading, click on link)