5 Factors That Decide Your Credit Score

in recent years, the economy and job fluctuations have challenged consumers.  The real estate market has recorded epic numbers of short sales and foreclosures.  Thankfully, the market in and around Savannah, GA, has rebounded and many consumers are readying themselves to purchase real estate.  A foundational consideration is the potential Buyer’s credit score.  Credit scores range between 200 and 800. Scores above 620 are considered desirable for obtaining a mortgage. Certainly, the higher the score, the more likely a buyer will receive better rates or fees from the lender.

These factors will affect your score:

1. Your payment history. Basically, a lender wants proof that you paid credit card obligations on time. This gives them confidence that you will also pay your mortgage on time.  Buyers are often unaware that having a “late” payment on a credit report can rule them out of getting a mortgage.  Your payment history must be squeaky clean for 12 months prior to getting through the mortgage underwriting process.
2. How much you owe. Owing a great deal of money on numerous accounts can indicate that you are overextended.  No matter how much a lender wants to work with you, he/she cannot move forward on approving a mortgage unless you meet the test of having the right ratio (percentage) of income to expenses. 
3. The length of your credit history. In general, the longer the better.
4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay promptly. If you are planning on buying a home in coming months, think twice before opening any new accounts.  When considering buying a home, a Buyer will be told by both the lender and the Realtor that it’s a sin to establish new credit during the process.  In fact, I often tell my Buyers, “Don’t spend any money on anything other than food and gas!”
5. The types of credit you use. Generally, it’s desirable to have more than one type of credit—installment loans, credit cards, and a current mortgage, for example. This can sometimes be a challenge for first time Buyers.  Occasionally, the type of credit you might have is unplanned, such as major medical expenses.  More often, however, Buyers simply don’t keep track of accounts, letting some go dormant.

For more on evaluating and understanding your credit score, go to http://www.myfico.com.  For more specific information, you might consider calling a lender to have them review your credit score and report and consult with you on ways to strengthen or protect your score during the buying process.  Call me for a referral to a superior local Savannah lender.