Credit scores are a very important factor when purchasing a home but many consumers are usure about what causes their score to up or down.
How is your Credit Score Determined? The typical score model for mortgages are FICO scores. They are determined by four main catagories:
- 35% is based on your payment history, this includes all accounts
- 30% is based on the amount owed to creditors, especially revolving accounts with high balances.
- 10% is based on your application for new credit, if you are loading up on credit it may damage your score.
- 10% is based on your mix of credit, numerous finance company accounts may lower your score.
How do you maintain a good credit score? There are key factors to maintaining a good FICO score:
- Pay your bills on time, even on late payment in the past 12 months can do significant damage.
- Keep balances low on revolving accounts, accounts with balances over 30% of the credit limit may lower your score.
- Don't credit surf, frequent credit applications or balance transfers may lower your score.
- Review your credit file at least once per year, this enables you to determine any errors.
In a summary- Credit scores are important to you, so be a good "Steward" of your finances!!!
