With Fannie Mae implementing risk based credit scoring adjustments that have an effect on borrowers with as high as a 719 credit score, it is important for borrowers to know what impacts a credit score outside of a clean pay history.  In the "old" days, if someone had no late payments there really was no cause for worry, but with today's credit score adjustments, a few points on a credit score can cost quite a bit of money. 

     Here are a couple ways someone who pays on time can have a lower credit score:         

     -Maxed out credit card balances. As I had written previously here: Outstanding Credit Balances and Your Credit Score , having a balance on a credit card higher than 70% of the credit limit can impact your score negatively.  Try to keep your balances under 70% of the limit.  Keeping them under 30% is even better.

      -Avoid consolidating credit cards into one balance prior to applying for a mortgage.  Same reason as above.

      -Make sure you have the right "mix" of credit: if you have only revolving debts, you may want to establish a small installment loan with a bank.  Lack of installment loan debt can hurt your score.

      These are a couple ways you can increase your credit rating a few months before purchasing or refinancing your home.

Michael Byrne

www.mortgageprosforum.com