 |
| Credit Scores and Home Loans |
|
|
 |
Should A Consumer Check Their Credit?
Today, almost everything related to obtaining a home loan centers on your credit history. Your credit report is a detailed statement that includes your past payment history, inquiries into your credit, and outstanding debts you may owe. You may be planning to purchase a home, a car, a boat, or may even be planning on signing up for a new credit card or looking for a place to rent. More often than not, someone will review your credit report to see how responsible you have been with your prior financial obligations.
|
|
|
|
By reviewing your credit report, you are able see what lenders see. This will allow you to better prepare yourself for any questions they may have. Even though you may have been responsible and timely for all your past payments, it still may be beneficial to review your credit to ensure that other data is accurate. There could be errors on your credit reports, or worst, fraudulent items that may go unnoticed unless you review your credit report.
|
|
What Is Your Fico Score?
Credit Scores are often called FICO Scores, a name which comes from its developers, Fair Isaac and Company. Your FICO Score is a mathematical calculation determined on information within your credit report. Your FICO score provides lenders, financial institutions, and even retailers with a standardized method of determining potential risks involved in extending you credit. The higher your FICO Score, the less risk you may represent, you may also be rewarded with lower interest rates or other special promotions.
|
|
What Can I Do To Improve My FICO Score?
FICO scoring models are complex and at times vary among creditors. If one factor changes, your score may change, but generally, any improvement will depend on how that factor relates to other factors considered by the model. Only the agency can explain what might improve your score under the particular model used to evaluate your credit application.
|
|
|
Generally, credit models evaluate the following types of information in calculating your FICO score:
|
|
|
| • |
Timely payment of your past bills. Payment history can be a significant factor. It is more likely than not, that your FICO score will be adversely affected if you have paid bills late, had accounts referred to collections, or declared bankruptcy.
|
|
| • |
How much is your outstanding debt? Many credit models assess the amount of debt you have compared to your credit limits. If your credit balances are close to your credit limits, that is likely to have an adverse impact on your FICO score.
|
|
| • |
What is the length of your credit history? Generally, models consider the length of your credit history. An inadequate credit history could have an adverse impact on your FICO score, but that can be offset by other factors.
|
|
| • |
Have you recently applied for new credit? Many scoring models look at the number of "inquiries" on your credit report when you apply for credit. If you have recently applied for too many new accounts, that may have an adverse impact on your FICO score.
|
|
| • |
How many and what types of credit accounts do you have? Generally, it is good to have established credit accounts, but too many credit card accounts may have an adverse impact on your FICO score. In addition, some models consider the type of credit accounts you have. Under some scoring models, loans from a finance company may adversely impact your FICO score.
|
|
|
To improve your FICO score under most scoring models, focus on paying your bills timely, paying down your outstanding balances, and avoid taking on new debt. It's likely to take some time to improve your score significantly.
|
|
|
Learn More About Your Credit
|
|
|
|
