Well maybe not everything, but it is huge part of the mortgage process. Not only should you know your credit score, but you should also understand what components determine the score. Also, the scoring model for a mortgage application might give you a different score than one you pull from an online source.
Here is the breakdown:
35% payment history - which includes the type of account, the recent activity and the severity
30% balances - what is the ratio between credit limit and credit balance
15% credit history - how long have you had credit, the age of the accounts
10% credit type - bank card, department store, travel cards
10% inquiries - the number of times you have applied for credit
With 35% of your score dependent on payment history, you can see where a 30 day late can severely impact the score. A public record, such as a bankruptcy, foreclosure or judgement can drop your score from 100-200 points.
Credit card balances should be kept at no more than 30-50% of the credit limit. Once the accounts approach the credit limit, the score will begin to drop. An account that goes over the credit limit, has dropped scores from 10-50 points.
Credit history is important, someone with relatively few tradelines or all recent accounts, will be affected more by inquiries and new accounts.
For more information on credit scoring and how to improve your score, please feel free to give me a call.
"I am never too busy for your referrals!"
Comments (14)Subscribe to CommentsComment