When it comes to home loans and securing your mortgage, there are few factors more important than credit score. A basic measure of your credit history and creditworthiness based on several factors that track back multiple years, credit score is one of the first and most valuable numbers lenders look at when considering the kinds of loan programs you qualify for and the sorts of rates or down payment assistance programs you may be eligible for.
At Primary Residential Mortgage, we’ve helped numerous mortgage borrowers understand the credit score required for certain mortgage loans. We’ve also offered assistance to many of our borrowers looking for basic tips on how to improve their credit score – with this in mind, here’s a two-part blog series on credit score, how it’s calculated, and what you can do to improve it if you’re considering applying for a mortgage or another major loan.
How Credit Score is Calculated
Technically speaking, there are a variety of credit scores out there. This is because credit score is calculated based on at least one of your three credit report types that’s available – the most common of these is the FICO score, which many lenders use, but not all.
Luckily, these are all relatively similar. Their final outputs may differ slightly, but they are all impacted by the same kinds of things. Elements like payment history, percentage of available debt used, length of account history and the number of accounts you have will all play a role in your final score.
Knowing Your Score
The first and simplest tip here if you’re considering any major loan: Know your credit score and whether you need to improve it for the kinds of loans and rates you want. Many credit card companies allow you to check your credit with no impact at least once a year, and many other banks allow this more than once per year. There’s no excuse today for not knowing your score as you head into a mortgage application.
And if you check your score and notice it’s too low for the kinds of programs you had wanted to apply for, it’s vital to get straight to work improving it. Bringing credit score back up is a process, one that often takes months, and you want to get started right away to keep your homeownership dreams from drifting too far off.
One of the first and most important steps to take once you’ve begun looking to improve your credit score is decreasing debt. Try to cut down on expenses or find ways of temporarily increasing income, then look to pay off your highest-interest debts quickly and get ahead.
For more on improving your credit score ahead of taking out a mortgage, or to learn about any of our mortgage services, speak to the staff at Primary Residential Mortgage today.
*PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Opinions expressed are solely my own and do not express the views of my employer.