Quick facts video 2 – How do I get approved for a mortgage loan and improve my credit score?
How does my credit score impact my ability to qualify for a mortgage?
Let’s start with some basic information about credit.
There are three major credit bureaus: Equifax, Experian, and TransUnion.
These credit bureaus document payment histories for mortgages, auto loans, personal loans, credit cards, and other consumer debt. They also track and report derogatory information such as collections, foreclosures, judgments, charge offs, liens and bankruptcies. From this compilation of debt and payment history a credit score is computed.
My credit history (list below) rent, utilities, mastercard, visa, student loans,
OH NO!!! (list below) collections, foreclosures, judgments, bankruptcies…
Understanding credit scores
Credit scores range from 300 to 850 and have proven to be highly predictive of future repayment performance. Lenders therefore depend on an individual’s credit score to determine the risk of a borrower defaulting on their mortgage loan.
In the past a credit score of 580 was commonly used as the lowest score acceptable for obtaining a mortgage, however after the 2008 mortgage crisis this score is now considered too risky and a score of at least 640 is now typically required. Scores above 720 are considered “good” credit since they represent a low risk of default and therefore the best pricing is obtained by borrowers with the highest credit scores.
300 NO WAY!
580 Sorry – won’t work today
640 Acceptable – but by improving your score – you could save!
720 WAY TO GO! That’s going to save you some bucks!
850 Are you kidding? You go you little credit master!
How do I improve my credit score?
- Well – make payments on time! This may seem obvious to some, but making your payments consistently on-time over the years is the most critical component of your credit score.
- Check your credit on a regular basis and if there are any errors have them corrected immediately. Federal law entitles you to one free credit report annually which can be ordered at freecreditscore.com
- Keep your credit card balances to no more than 1/3 of the outstanding limit. Maxing out your available credit negatively impacts your credit score, even if you pay your bills on time.
- Don’t close that account! Keeping revolving accounts open especially over time improves your score.
1. Make Payments ON TIME!!
2. Check your credit at freecreditscore.com.
3. If your Visa limit is $15,000 don’t let your balance go above $5,000. Maxing out your cards damages your credit score!
4. Don’t close that account, even infrequently used accounts can improve your score.
Thanks for viewing our quick facts Credit video, I hope you found it helpful. If you have any questions please feel free to call us, our loan officers are friendly and ready to help!
Our loan officers are happy to answer any questions! So give us a call at 800-Homestead-8! (A text file of this video can be found on our website)