Breaking Down Your Credit Score

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Your FICO credit score ranges from 300-850, where a higher number indicated lower risk. As you apply for a home loan, your credit score is a large factor in determining the amount of your home loan. Here are 5 factors that make up your credit score.

Breaking Down Your Credit Score

Payment History

Payment history makes up 35% of your overall FICO credit score. This section includes your account payment information, including any delinquencies and public records. If you make a late payment, it will significantly affect your credit score. As you might expect, the repayment of past debt is the number one thing you can do to lift your credit score the fastest. Making on-tome payments is one of the best ways to maintain a high score. Using auto-pay for your monthly expenses can help you stay on track.

Amount Owed

Amounts owed makes up 30% of your overall FICO credit score. This section includes how much you owe on your accounts. The amount of available credit you’re using on revolving accounts is heavily weighed. It is a good idea to keep low credit card balances and not use too much of your credit.

Length of Credit history

Length of credit history makes up 15% of your overall FICO credit score. The longer you have your credit lines open the better. This section also includes the timeframe since an account’s most recent transaction. Newer credit users have a hard time achieving high credit scores since those with a longer credit history have more data. When applying for a home loan, your lender wants to see that you have an extensive history of paying bills on time.

Credit Mix

Credit mix is also known as types of credit used. This section makes up 10% of your overall FICO credit score. FICO credit scores consider the combination of credit cards retail accounts, installment loans, finance company account and mortgage loans. As you can see, credit mix is not a huge factor in determining your overall score unless there’s very little other information from which to base your score. However, there is something to be said that if you have the decision to open your fifth retail card or an auto loan, utilizing an auto loan could help broaden your credit mix.

New Credit

New credit makes up 10% of your overall FICO credit score. When jumping into the home search, it’s ok to get your credit pulled but getting to many hard pulls from multiple companies can ding your new credit category of your credit score. So how you shop for credit and within what timeframe can affect your score. Once you get approved, it’s good to act with intention to find the right home in a timely manner.

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