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How To Optimize A Credit Score For THe USDA Loan Program

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Education & Training

Credit Score Optimization Tips for the USDA Loan Program

USDA-Loan-Credit-ScoreWith lender’s continuing to tighten their guidelines, it is more important than ever to know how to optimize your credit score for getting a USDA Loan here in Arizona.  There are five components that make up your credit score, let’s take a look at them really quickly.

They are, in order of importance:

  1. Your Payment History, which includes things like late payments, collections, on time payments, bankruptcies and such.  Keeping a good payment history is not only important for your credit score but also important for simply qualifying for the USDA Loan.
  2. Next would be the Amounts you owe on your credit.  So balances on credit cards, installment loans and mortgages have an impact here.
  3. Next would be the Length of your credit history.  Did it just start, or does it go back 2 years or even longer.
  4. Next is the amount of inquiries, how recent they are and did they result in any new credit.
  5. And finally, the types of credit you have.  Is it all credit cards or is there a mixture of credit cards, car loans and maybe a mortgage.  Obviously, the mixture is the best.

While all those items impact a credit score, all we are concerned about for this quick post is how to quickly improve a credit score for getting a USDA Loan, right?

One of the biggest factors that impact your credit score is the Amounts Owed.  It has about a 30% overall impact.  And one of the quickest ways to improve a score is to take a good look at your Debt to High Credit Ratios.  This simply means to make a note of how much you owe on any revolving account and compare it to your credit limit for that account.

So if you owe $750 on an account that has a credit limit of $1,000 then your Debt to High Credit Ratio is 75%, and that aint good.

Now, we know that the credit bureaus keep their credit score models a super secret, but we do know a few very important things about them.  And number one is to keep your Debt to High Credit ratio for each account as CLOSE to zero as possible.

So the quickest way that I know of to quickly raise a credit score is to get your Debt to High Credit ratio down between 3 to 25% per account.  And remember that for credit score purposes, debt should not be consolidated, it should be spread out among your revolving accounts to fit within the 3 to 25% ratio.

I hope you found this Arizona Home Loan tip useful and would love to hear your comments.

To find out if you qualify for a USDA Loan call (520) 225-0380 or click on the Get Started on USDA tab over at USDARuralHomeLoans.com.  If you want to go ahead and get your application in, you can fill out my Home Loan Application Online here.

Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

Great information for your borrowers!

You are my #1 go to guy for my friends in AZ!

 

Jan 18, 2011 08:14 AM
Paul Dunn
Tucson, AZ
former orginator

Thank you Kathy!

Jan 18, 2011 08:20 AM
Brad Hornshaw
Brad Hornshaw Realtor Lynnwood, Bothell, Everett - Lynnwood, WA
Realtor, Listing Agent, Buyers Agent, Investments
Hi Paul Very good information. I have always kept my debt ratio very low or at 0% and have never had trouble qualifying for credit........Brad
Jan 18, 2011 08:23 AM