Whether you’re looking for a new home loan, a refinance or anything else in the mortgage sphere, your credit score is going to be one of the biggest factors. Not only will it often dictate which kinds of loans you’ll be approved or denied for, it will help determine your mortgage rate and several other vital financial factors.
At City Creek Mortgage, we’re here to line you up with the best possible loan no matter what your credit score is. Your options go up as your score does, though, and it’s important to know a bit about how this vital metric is calculated. Here are some of the most important factors.
Credit bureaus don’t simply care that you have credit available – they want to see that you’re using it regularly, and then paying it back within the proper time limits. To do this, they use card utilization rate: A ratio that lines up available credit compared to credit currently in use. You can calculate this simply by dividing your open credit balances by your total credit limit. If your ratio is too low, it could negatively affect your credit.
These only come after significant negative events, such as a foreclosure, bankruptcy or lien. These event should be avoided at all costs, as they’ll put a major stain on your credit score and can take years to remove.
Average Account Age
The bureaus want to see a relatively long history of proper credit use – the longer the history, the more comfortable they can be with your ability to repay debt. For this reason, never close one of your oldest credit cards near anytime where your credit score might be needed. This will lower your average account age, and could lower your score.
Have you been making late payments? That’s a big no-no for credit score. Credit bureaus have specific trackers for basic bill payment timing, and if too high a percentage of your payments are late, you’ll get dinged.
The ability to hold multiple credit accounts and make the proper payments on all of them is very attractive for your score. Know that this is one of the smaller overall factors, however, so there’s no need to rush to open up new lines of credit if you only have one or two. Making the proper payments and hitting due dates for the cards you already have should be the first priority.
To learn more about credit score, or any of our other mortgage services, speak to the brokers at City Creek Mortgage today.