Your credit score is one of the main factors in purchasing a home. That’s why it’s important to know which factors influence your credit score before applying for a mortgage loan. At First Ohio Home Finance, our loan officers can help you understand the makeup of your credit score and also help you manage and improve your credit score.
Components That Make Up A Credit Score
Payment history is the most important component of your credit score. Be sure to always make payments on time. Late payments will negatively influence your score. Have a system to assure your bills are always paid on time. Avoid late payments or the excessive use of credit by maintaining a cash “cushion” to pay for unexpected expenses. Don’t “max out” your cards. It’s better to have a high credit limit with a low balance. Payment history makes up about 35% of your credit score.
Another important component is the amount you owe. Revolving utilization is one indicator of how much you owe on accounts. Your revolving utilization is determined by your total balance owed and your total credit line. The amount you owe lenders impacts your credit and makes up about 30% of your credit score.
Length of Credit History
The length of your credit history is also factored into your credit score. In general, the longer your credit history, the better. Never close old accounts as the age of these can actually help your score. How long your accounts have been opened determines the length of your credit history, which typically makes up about 15% of your credit score.
Lenders perform a strict inquiry when you apply for a new credit card or loan. These inquiries […]