Whether you’re in the market for your first home, an investment property or even a new car, your credit score plays an important role in your financial future. Your credit score means the difference between being denied or approved and for a high or low interest rate.
But what exactly is your credit score?
Your credit score is a three-digit number derived from detailed information about your credit history. It’s generated from a mathematical algorithm using the information from your credit report, and it can be one of your most valuable assets. Out of all the credit scoring models in existence, the FICO credit score dominates the market. According to FICO.com, ninety percent of all financial institutions in the U.S. use FICO scores in their decision making process.
Credit scores typically range from 300 to 850, and the higher score you have, the better. Let’s break it down to see what specifically goes into your credit report, since this model weighs some factors more heavily than others:
Payment history (35%) – Your public records and all of your account payment information history.
Amounts owed (30%) – Be aware of the available credit you owe on each of your accounts.
Length of credit history (15%) – Your time of account activity. How long has your account been open?
Types of credit history (10%) – Enjoy using different types of credit? This mix will be a factor too.
New credit (10%) – Any recently opened accounts or pursuits of new forms of credit
When you apply for a loan remember the higher your credit score, the more likely you are eligible for the best interest rates. That interest can really add up! A higher credit score will let you keep some extra money in your pocket! A poor credit history could mean you may need to cough up a larger down payment for a home loan.
Do you want to explore your savings? vLoan can help by giving you an estimate of how much you could save on your future mortgage.
We hope this information has helped you during your house hunting journey. You should now be motivated to establish or improve your credit. Your wallet will thank you. If you have any additional questions, contact a mortgage advisor on our team at vLoan!