What Makes Up Your Credit Score?
Your credit score is a key factor in qualifying for a mortgage loan.
A good credit score indicates to lenders that you're a low-risk borrower, which can lead to a lower interest rate on your mortgage.
On the other hand, a low credit score could lead to a higher interest rate and could mean you won't qualify for a loan.
In this article, we will answer the question, "What makes up your credit score?" Let's take a look and find out what you need to know.
Perhaps the most crucial factor in your credit score is your payment history. This includes whether you've made your payments on time and any missed or late payments. Lenders want to see that you're reliable when repaying your debts, so a history of timely payments will go a long way in boosting your score.
Another important factor in your credit score is credit utilization, which is the amount of available credit you use at any given time.
For example, if you have a credit card with a $1,000 limit and carry a balance of $500, your credit utilization would be 50%. A general rule of thumb is to keep your credit utilization below 30% to maintain a good credit score.
The length of your credit history also plays into your score. In general, the longer your history, the better. That's because it gives lenders an idea of how well you manage debt over time.
However, if you have a shorter history, don't worry - there are still plenty of things you can do to improve your score.
By understanding the factors that make up your credit score, you can take steps to improve it. Remember, a good credit score is essential, not just for qualifying for a mortgage loan, but also for getting favorable terms.
So if you're planning on buying a home in the near future, start working on boosting your score today!
As always, if we can help you move in, move out, move up, or move on, let us know. Anchor Real Estate is here to help!