Learn Exactly What Affects Your Credit Score
When you apply for a mortgage, one of the first things that lenders will do is check your credit score. The better your credit score is, the better rate and terms you will be eligible for on your mortgage. If your credit score is too low, some lenders will not even grant you a mortgage at all.
Protecting your credit score and building it up is very important. But to do that you need to know what factors affect your credit score. In this article, we will review 6 factors that affect your score.
- Your Bill Payment History
How well and how promptly you pay your bills is the most heavily weighted factor in your credit score. Late payments will put a dent in your score, but more serious issues such as bankruptcy can devastate your score.
- Level of Debt
How much debt you carry in relation to how much credit you have is another big factor in determining your credit score. As a general rule, it is recommended that you carry no more than 30% of your available debt at any given time. So if you have a credit card with a $1000 limit, you should carry a balance of no more than $300.
- Credit History Age
Credit history age takes into account your oldest account as well as the average age of all your accounts. Credit history age is important to lenders because it shows how much experience you have with borrowing.
Each time you apply for new credit, it lowers the average age of your credit history. That is why it is not recommended that you open several new accounts at once.
- Types of Credit
There are two main types of credit that you can have on your credit report. These are revolving accounts and installment loans. It is better for your credit score if you have a variety of types of loans as it demonstrates that you have more experience with credit.
- Credit Inquiries
Whenever you submit an application for credit, there is an inquiry into your credit report which can affect your score. A couple of inquires every now and then won’t have much of an impact, but if you have a lot of inquires all at once, it can hurt your score.
Fortunately, inquires only factor into your score for 12 months.
If you are looking for a mortgage, but you don’t have a great credit score, there is still hope. At Matrix Mortgage Global, we can help you find the right lender for you.