Understanding Your Credit
How Your Scores Are Calculated
The all-important credit score - know exactly where you stand.
Credit scores range anywhere from 350-850. The higher the better. Your number is determined by five factors combined to calculate your personal score. Even if your score is lower than desired, don’t give up. With a little clarity and focus, a lot can be done to make things better.
Types of Credit - 10%:
This looks at what types of credit you have.
New Credit - 10%:
New applications for credit might cause you to be risky and lower your score.
Length of History - 15%:
How long your accounts have been open. If you are going to close an account, DO NOT close the oldest.
Payment History - 35%:
Making sure that you have your payments in full and on time.
Debt Utilization - 30%:
How active EACH of your accounts are will affect this portion of your score.
Do's and dont's
How to handle your credit during the mortgage process.
Do's
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Immediately inform your Loan Officer if there are any changes in your employment, income, or assets.
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Continue living in your current residence.
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Continue making all mortgage or rent payments.
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Continue to make payments and stay current on all existing credit accounts.
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Be prepared with an explanation for any credit “blemishes” and recent credit inquiries.
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Research and select a preferred homeowner’s insurance provider.
Dont's
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Make any major purchases or home improvements.
(ie. auto, boat, appliances, furniture, pool) -
Apply for new credit or loans.
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Pay off any charge-off accounts, collections, loans, credit cards, or consolidate debt.
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Close any credit card accounts, max-out, or over-charge credit accounts.
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Change bank accounts of transfer balances from one account to another.
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Change the source of your “closing funds.”
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Deposit large amounts of cash into your own bank account without proper documentation.