Understanding Your Credit Score And Tips To Improve It

Understanding Your Credit Score And Tips To Improve It

Knowing your credit score is a vital part in the mortgage process. Yes you can get approved for a loan with a credit score of 620 but raising it a little with knowing how to manage your credit will get the best outcome for  your future.  Not only will you get a better interest rate with a higher score you will have lower down payments and  lower monthly payments. Below is a list of credit scores and some factors that  impact your credit score.

 720 – 850: Excellent

  • generally been at their current job more than 2 years. 

  • pay at least the minimum payment on debts on time every month

  • carry a balance of less than 30% of available  credit

  • do not open new credit accounts frequently, or have many credit inquiries. 

680 – 719: Good

  • may be doing almost everything right

  • have a lowered score because of one or more minor issues. 

  • credit cards has a high balance.

  • late payment in the last 2 years

  • may have had a number of recent credit inquiries

620 – 679: Average

  • open up new credit accounts

  • saved 15% off their first purchase at a department store

  • took advantage of low introductory rates for balance transfers on credit cards

  • large debt loads from car loans or student loans

  • too many credit cards and/or have high balances on those cards

  • late or missing minimum payments

580 – 619: Poor

  • combination of factors listed in the “Average” 

Below 580: Bad

  • combination of factors described in the “Average” group 

  • foreclosure or bankruptcy

Buyer’s credit score can be crucial to determining which properties the buyer can afford. Credit scores can affect the loan amount, interest rates, required down payments, and if a potential buyer can be approved for a conventional mortgage at all.

Here is an example of the difference in cre dit scores and the loan interest rate , monthly payment based on a loan amount of $300,000

Image title

Based on the same loan amount the higher credit score gets a 1.5% better interest rate and saves approximately $300. a month on their mortgage  monthly. That is a huge difference!

Luckily, for most Americans, it is possible to increase their credit score with a few easy steps. Some credit scores can go up quickly, while others may take a little more time to repair.  

Here is a breakdown of what is looked at to calculate your credit score

Payment History - 35% of Credit Score

Amounts Owed - 30% of Credit Score

Length of Credit History - 15% of Credit Score

New Credit - 10% of Credit Score

New Credit - 10% of Credit Score

Specific Events that Reduce Credit Scores

We may do some of the following things that may ultimately hurt our credit scores:

  • Open new credit card accounts to transfer balances to lower rate cards

  • Close old accounts so that the average age of open accounts is less than 5 years

  • Apply for a few loans, hoping to shop around for the best rate

  • Open retail credit accounts to receive discounts

  • Keep overall credit balances low, but have one account with a high credit ratio

  • Close a credit card account before paying off the balance in full

  • Have many open credit accounts – even if they have zero or low balances

  • Not making payments on time -- skipping a month, paying late, or paying less than the minimum monthly payment

  • Allowing a disputed charge go to collections, rather than correct it 

Actions to Improve Credit Scores

Here are some ways to improve a credit score: 

  • Be sure to make at least the minimum monthly payments on time every time

  • Do not let credit accounts go to a collection department or be sold to a collection company

  • Limit the number of open credit accounts to between 3 and 5 accounts

  • Keep credit balances low (or zero) on all open accounts

  • Try to keep old credit card accounts open

  • Keep credit inquiries to a minimum

  • Do not close credit accounts until the balances are paid off in full

Knowing these key factors and improving upon your score will set you up for success in obtaining your dream home. It can take some time to get your score where you want it to be, patience and dedication  are key. Once you are at your best score you  feel that you can obtain give me a call to help you find your dream home!

Brigit Brust Headshot
Phone: 267-235-7516
Dated: May 23rd 2018
Views: 676
About Brigit: ...

Property Search

RSS Feed

View our latest blog posts in your RSS reader. Click here to access. RSS

Search Blog

Recent Blogs

Why 2020 Is The Best Year To Buy That Investment Property - There isn't a bad time to buy an
5 Investment Properties In Port Richmond Below 210K - People who are buying an
Northwest Living - Why Manayunk, East Falls, and

Saved Properties

This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.

Click 'Save' to add a property to this list.

Register / Login

New & returning visitors please enter your information to login.

By clicking 'register' you are agreeing to our terms of use & giving us expressed written consent to contact you.

Questions? Comments? Complaints?

This message will go directly to the head of our team.

Location & Address

2200 Walnut Street
Philadelphia, PA