Understanding Your Credit Rating

Your credit rating helps to establish your likeliness of paying back your mortgage. It is used to determine your loan options and interest rates. A credit score ranges from 300 to 850 and a higher score may improve your chances of getting approved for a mortgage at a lower interest rate.

Before you begin to look for a home, you should get your credit report. That way you can have errors corrected by the credit agency prior to applying for a mortgage. By law, you can check your credit report once a year for free.

Calculating your Credit Score

There are several factors used to calculate your credit score, also known as your FICO® score.

Payment History
Your payment history includes a record of how well you’ve repaid loans, including missed payments, repaying the entire debt, and whether or not you’ve declared bankruptcy or have outstanding collection accounts.

Debt Owed
Your credit score takes into account how much credit card debt you have, as well as how much you owe on outstanding loans, such as car and student loans.

Credit History Length
The length of time that has passed since you opened each credit card is used to look at the timeline of activity on your cards.

New Credit
Your credit score also takes into account how often you apply for new credit and the types of credit you currently use.

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