What Affects Your Credit Score?

With mortgage rates starting to rise and prices just about perfect for buying, I’ve had a lot of discussions lately with first-time home buyers about what it takes to get a loan these days at a good rate. Naturally, a good credit score is important. (Typically, we’re seeing the best rates for buyers with scores above 740, but you will need at least a 620 mid-score to qualify with most lenders)

You may not be ready to buy soon, but if you’re thinking about it in the next couple of years, now is a great time to work on your credit score. If you’re not familiar with how credit scores work, here’s what typically goes into them:

* Your past payment history = 35%. The more paid on time, the better.
* Amount you owe = 30%. The less you owe relative to your total available credit, the better.
* How long you’ve had credit = 15%. Longer is better.
* How much new credit = 10%. Lots of new credit lowers your score.
* Kind of credit = 10%. It’s better to have different sources of credit.

Of course, credit score is only one part of the picture. Having a down payment of 20% or more can also influence your shot at the best rate. With a VA and USDA loans, you are not required to have a downpayment.

If you ever have any questions about the path to home ownership or the ins and outs of financing, please feel free to get in touch with us or our Preferred lender – Alpha Mortgage – Stan Walston (910) 526-6835

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