Tag: improve credit

Breakdown Your Credit Score

Credit Score Breakdown

When buying a home, your credit score is an important factor in your home loan approval. It is important to know what is on your credit and what credit score you have when applying for a mortgage.

While, the exact scoring models are proprietary and not released by the credit bureaus to the public, credit experts have determined the weight of each factor that determines your credit score.

Related: Buying a home with Bad Credit may be possible with FHA Home Loans. We accept applications down to a 580 credit score!

What Makes up your Credit Score

Payment History

Paying your bills on time is the most important factor for your credit score. Weighted at 35% of the total score, paying bills late can devastate your credit rating.

Amounts Owed

Credit to Debt ratios are the second most important factor which is weighted at 30% of the overall score. The good news about this is that it is a quick and easy fix to improve your credit scores. For example, if you have a credit card with a $500.00 limit and you owe $490.00, it is essentially “Maxed Out” which reflects poorly on your credit rating. Paying down this debt to under 30% of the limit ( $150 or less in this example) would boost your scores quickly!

Length of Credit History

The length of time you have had accounts open is the next rating factor. At 15% of the credit rating, the credit bureaus know that maintaining long credit relationship with banks and lenders proves that you are a good credit risk and positively affects your score. For this reason, it is important to keep old credit lines open even if you are not utilizing them.

New Credit Inquiries

Having your credit pulled is an necessary evil when applying for a mortgage. What is not necessary is having it pulled by 10 different institutions for different credit types. If you apply for credit cards, auto loans, and mortgages over a short period of time, your credit rating may drop.

Types of Credit

The final major category that determines your credit score is the types of credit that you hold. Long term investments such as a mortgage can positively impact your credit. If you only have revolving credit such as credit cards, your credit depth is shallow and may not give you the highest credit scores possible.

Click here to Download Our Credit Tip Flyer!

How to Improve your Credit Score

There are simple techniques to improving your credit scores. It is important to monitor your credit from time to time and make sure all of the information is accurate. If there are errors, you can dispute the information directly with the bureaus to have it corrected. It is not suggested that you do this before or during the mortgage process as it may cause delays.

Additionally, paying down revolving account balances can quickly boost your credit scores. While there are no magical fixes to your credit, there are several best practices that you should do to increase your credit score.

Tips to Improve your Credit Rating

  • Correct inaccuracies on your credit
  • Pay all your bills on time.
  • Do not apply for too many lines of credit.
  • Do not max out credit cards.
  • Keep older credit lines open.

Contact a mortgage expert today by calling us at 1-800-555-2098 or simply apply online below. We are happy to help!

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What’s the Deal with Credit Scores?

credit scores

The History of Credit Scores

Credit reports and scores have played a large part in many Americans’ lives, but what do we really know about credit scores?  Before the use of credit scores, it was up to lenders to decide whether a person would be granted a loan.  This method was not always the best as lenders’ own personal biases would sometimes come into play.  In the new age of credit, factors such as age, race, and religion are not allowed to be reported to the credit bureaus, which makes for a fair playing field.

What is a Credit Score

Credit scores are three numbers that tell a lender the borrower’s credit risk, basically can or will the borrower be likely to pay back the money.  The three major bureaus, TransUnion, Experian, and Equifax, store data that has been collected from creditors, collection agencies, and other financial institutions.  This information is then calculated into a score, the most common being the FICO score.  The FICO score ranges from 300 to 850 with 850 being the best, but also almost impossible to obtain.  The best way to increase your FICO score is to make sure you are paying your bills on time and to keep the amount you owe low.

How Does My Credit Score Help Me Get a Mortgage?

Having a good or excellent credit score is helpful when trying to apply for a mortgage.  Here at Riverbank Finance, our loan officers will ask our clients about their credit scores to see if they qualify based on guidelines from our lenders.  With your permission, our loan officers can immediately pull your credit from the three bureaus.  This makes it possible for them to quickly determine whether you are preapproved for a loan or not.  Being able to quickly pull credit helps to speed up the process.

What if My Credit Score is Too Low to Get a Mortgage?

If you were not approved for a loan because of your credit score there are still some things that you can do to improve your credit score and to get your dream home.  As stated earlier the easiest way to increase your credit score is to pay your bills on time.  When a lender sees that a person has had a bunch of late bills and bills that are in collections it tells the lender that the borrower may not be trusted to pay back the money loaned.  So, get those bills paid on time!

Related: Buying a Home with Bad Credit

How to Improve Your Credit Scores

  • Pay Bills on Time
  • Pay Down Revolving Debt
  • Build Long Term Credit History
  • Dispute incorrect information

High credit card balances also hurt your credit score.  To fix this, try and pay your balances off as low as possible and make sure that you are not using more than 20 percent of your available credit.  Also make sure that you are using different types of credit accounts which can include mortgages, auto loans, student loans, and credit cards.  The length of time that you have had credit can affect your score.  You will want to keep the oldest line of credit that you have open and not open too many new ones.  Finally, keep the number of hard inquiries into your credit score low!  Although this only makes up a small percentage of your credit score every point counts!

What is the Minimum Credit Score Required for a Mortgage?

At Riverbank Finance, we are able to go as low as a 580 credit score for FHA Loans, VA Loans, and even some Zero Down USDA loans.  This is great for those still trying to increase their scores!  For conventional loans, we are able to take a 620 credit score and higher.  Give us a call at Riverbank Finance and see if we can help you to improve your credit score today and move you into your dream home!

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INCREASE YOUR CREDIT SCORE WHEN APPLYING FOR A MORTGAGE

tips for improving your credit score

Mortgages have been a hot topic of conversation lately as rates continue to track lower and lower.  People continue to refinance their homes at unprecedented rates and new home sales are also starting to pick up.  People do not want to miss the golden opportunity which comes along with historically low rates.  The only problem that many have ran into  in the last few years are mortgage are tougher to get then have been in the past.  Mortgage lenders have require more down payment longer job times, and importantly better credit scores.

ALSO READ: Buying a Home with Bad Credit

How do credit reports work?

Credit reports keep track of a person’s credit history.  All of your current car loans, credit and charge accounts, and home loans report to the three credit repositories which then are able to put these histories into a report.  This report shows your payment history even if you are late on your payments.  These reports will report that you are not as long as pay your payment within 30 days of the due date.  Your credit report will also show if you have had accounts turn into collection companies as the result of non-payment, car repossessions, foreclosures, and bankruptcies.  Typically this information stays on your credit report for at least 7 years.  After that, the old credit accounts start falling off your credit report.

Having a Good Credit Score is Important

So in closing, make sure that you are responsible with your payment.  Make sure that you are prompt with your payments and do not overstretch yourself financially so you can always pay your payments on time.  If you don’t you could end up spending thousands of dollars extra over the life of your home mortgage.  Call the experts at Riverbank Finance Finance today 800-555-2098.

Request Information Now!