Understanding your credit score

Your credit score can impact you in a number of different ways. It will affect the interest rate you pay on your mortgage, your insurance premiums, as well as the cost of consumer loans. Having a clear understanding of credit scores and knowing how to achieve the highest rating possible can help save you tens of thousands of dollars in the long run.

A credit score is a number that helps lenders determine how likely you are to make your proposed monthly payments on time.

A FICO score on a mortgage credit report will range from 300-850, and is made up of the following:

35% of the score is based on Payment History
a. This considers past due accounts, collections, judgments, bankruptcies, etc.
b. The more recent any adverse credit is, the greater the impact to the score
c. The number of accounts that have been paid as agreedCredit score pie chart

30% of the score based on the Amounts Owed
a. The number of accounts with balances
b. The proration of balances to total credit limit of revolving accounts
c. The total amount owing on specific accounts

15% of the score is based on the Length of Credit History
a. Time since accounts opened and most recently used

10% of the score is based on New Credit and Inquiries
a. The number of recently opened accounts and number of inquiries
of your credit

10% of the score is based on the Types of Credit Used
a. The number of various types of accounts (revolving, mortgage, installment, etc)


Credit score chartCredit scores change moment by moment as balances and other information is updated to the credit bureaus. By understanding the factors that determine your score, you can take specific actions that will help ensure the highest possible score. For a free credit review, call or e-mail me. I will help ensure you are in the best situation possible when the time comes to purchase your next home.

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