Home buyers who are seeking a mortgage find out early-on that 
their credit score plays an important part in the home buying process and in determining the interest rate that a lender offers.
What is a credit score?
A credit score is a number that lenders use to estimate risk. Experience has shown them that borrowers with higher credit scores are less likely to default on a loan.
How are credit scores calculated?
Credit scores are generated by plugging the data from your credit report into software that analyzes it and cranks out a number. The three major credit reporting agencies don’t necessarily use the same scoring software, so don’t be surprised if you discover that the credit scores they generate for you are different.
Which parts of a credit history are most important?
Following is a breakdown of the items and their level of importance:
35% – Your Payment History
30% – Amounts You Owe
15% – Length of Your Credit History
10% – Types of Credit Used
10% – New Credit
What’s a Good Credit Score?
Credit scores (usually) range from 340 to 850. The higher your score, the less risk a lender believes you will be. As your score climbs, the interest rate you are offered will probably decline.
Borrowers with a credit score over 700 are typically offered more financing options and better interest rates, but don’t be discouraged if your scores are lower, because there’s a mortgage product for nearly everyone.
Here’s a look at an approximate breakdown of credit scores among the US population.
Up to 499: 1%
500 – 549: 5%
550 – 599: 7%
600 – 649: 11%
650 – 699: 16%
700 – 749: 20%
750 – 799: 29%
Over 800: 11%
Multiple Credit Scores
Your bank will pull credit reports and scores from all three major credit reporting agencies: Transunion, Equifax and Experian. They’ll probably use the middle score to work your loan application. Ask your lender to explain which credit scores will be used and how they affect your loan application.
For more valuable information please go to I Want to Buy my Home at the Bottom.
If you are looking for assistance in finding the perfect home in Hoboken, contact Eddie Perez at (201) 344-2886 or go to Hoboken Condo Expert.
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