Credit Score

A person's credit score is one of the most important factors that lenders consider when approving a loan. Credit scores can range from between 300 and 850. Lenders like scores above 620. The median credit score in the U.S. is 723. A lender will check with the 3 main credit agencies for your credit score, and take the average. A credit score is a number lenders use to help them decide the chances of being paid back after offering someone credit. A score is an estimate of your credit risk based on a snapshot of your credit report at a particular point in time. The most widely used credit scores are FICO® scores. Fair Isaac Company developed FICO scores based solely on information in consumer credit reports maintained at the credit reporting agencies.

Factors that affect your credit score are:

  • Credit card payment history (did you pay on time?)
  • Amount that you owe between all your accounts (are you overextended?)
  • How long have you had a credit card, or a loan?
  • New credit cards or new loans with installment payments. The more you have the more risk you are.
  • Different kinds of money owed, for example, a car loan, a mortgage, and credit cards.

Check your credit report at least 6 months BEFORE applying for a mortgage, in case there are errors in your report. By September 1, 2005 everyone will have the right to obtain one free copy of their credit report a year from each of the three major credit reporting agencies. For more information, contact the Annual Credit Report Request Service at PO Box 105281, Atlanta, GA 30348-5282 or call 1-877-322-8228 or go to www.annualcreditreport.com. Another good website for learning about credit scores is www.myfico.com.

Improving your credit score:

  • Check for and correct errors in your credit report. Mistakes happen, and you could be paying for someone else's poor financial management.
  • Pay down credit card bills. If possible, pay off the entire balance every month. However, transferring credit card debt from one card to another could lower your score.
  • Don't charge your credit cards to the maximum limit.
  • Wait 12 months after credit difficulties to apply for a mortgage. You're penalized less for problems after a year.
  • Don't purchase big-ticket items for your new home on credit cards until after the loan is approved. The amounts will add to your debt.
  • Don't open new credit card accounts before applying for a mortgage. Having too much available credit can lower your score.
  • Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.
  • Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.

This information is copyrighted by the Fannie Mae Foundation and is used with permission of the Fannie Mae Foundation. To obtain a complete copy of the publication, "Knowing and Understanding Your Credit," visit www.homebuyingguide.org.

Contact Bob and Linda Lario today for Colorado Ranch Land, Mountain Homes and Land, and Real Estate Acreage in Western Colorado!

  • Bob and Linda Lario
  • RE/MAX© Mountain West
  • P.O. Box 778
  • Paonia, CO 81428
  • Office: 970.527.7759
  • Toll Free: 800.571.7670

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