When buying a house what is a good credit score?
As helpful as it is to you and potential lenders to read through your detailed credit reports, time is of the essence and there’s a need for a faster way to summarize your credit history. Introducing your credit score. A credit score is a number that summarizes your credit risk. The score is based on a snapshot of your credit reports at one of the three major consumer reporting agencies (Equifax, Experian, and TransUnion) at a particular point in time. This helps lenders evaluate your credit risk. Your credit score influences the credit that’s available to you and the terms, such as interest rate, that lenders offer you.
The credit scores most widely used in lending decisions are FICO® Scores, the credit scores created by Fair Isaac Corporation (FICO). A good FICO® Score means better financial options for you.
What’s a good number?
800 or Higher - Demonstrates to lenders that the consumer is an exceptional borrower
740 to 799 - Demonstrates to lenders that the consumer is a very dependable borrower
670 to 739 - Considered by most lenders to be good scores
580 to 669 - Some lenders will approve credit applications within this score range
Lower than 580 - Demonstrates to lenders that the consumer is a very risky borrower
How’s my number calculated?
1. Percent of On-Time Payments (35%) - This is a heavily weighted factor in calculating a credit score, so just one or two late payments could significantly affect your score. Paying bills on time is one of the best ways to keep up good credit health.
2. Open Credit Card Utilization (30%) - Your available credit compared with how much you're using at any given time, calculated by taking your total open credit card balances and dividing it by your total open credit card limits. Normally, 30% or lower is better.
3. Length of Credit History (15%) - This factor averages the ages of your open credit cards, mortgages, auto loans, student loans and other lines of credit on your credit report. If your credit history is lengthy, lenders have more information to accurately assess creditworthiness.
4. Credit Mix (10%) - This factor considers your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. You don't necessarily need to have one of each to have an increased score. However, having various types of credit--both revolving and installment--on your profile can positively contribute to your creditworthiness.
5. New Credit (10%) - This factor looks at how many new accounts you have by type of account as well as how rapidly you open accounts. If you have been managing credit for a short time, don’t open a lot of new accounts too rapidly. Inquiries remain on your credit report for two years, although your score only considers inquiries from the last 12 months. FICO Scores have been carefully designed to count only those inquiries that truly impact credit risk, as not all inquiries are related to credit risk.
For more information, Please visit Cent Savvy Credit Repair Counseling