Credit Help – Credit Score for Mortgage Financing

Credit Help for Real Estate Financing: Five Categories of Your Credit Score

Executive Summary about credit help by Jeanette Joy Fisher 

1. Payment History — 35%

Negative points lower credit scores because of 30 days, 60 days, and 90 days late on any debt. The dollar amount of these delinquencies also impacts credit scores. The older these derogatory items are, the less impact they have on credit scores. Collection items unfavorably shape credit payment history.

2. Proportional Amounts Owed — 30%

The amount owed on a credit line compared to the available credit is termed the proportional amount owed. With a credit card limit of $5,000, the score will be higher if less than $2,500 is owed. This raises your proportional amount owed scoring factor.

To raise your credit score dramatically and quickly, pay down as much as possible on each credit line instead of paying off one credit card at a time.

3. Length of Credit History — 15%

Any account over twelve months with a good payment history helps a credit score if the balance is not too high compared to the available credit. The time since accounts opened and the time since account activity are factored into the length of credit history.

4. New Credit — 10%

Whenever you apply for a new credit line, your score receives a negative hit. Obtaining new credit lowers your credit score. We only apply for credit when applying for mortgages. Every time we get a new mortgage, our credit scores go down.

5. Types of Credit Used — 10%

The different types of loans taken out by consumers affect credit scores. Credit assessors view mortgage accounts more favorably than consumer finance accounts. Too many installment loans, auto loans, and department store credit cards affect credit negatively. To improve your credit score, pay off installment loans and consumer finance company accounts after you have lowered your proportional amounts owed. Achieve higher credit scores by having only mortgage accounts and a couple of major credit cards with low balances.

Credit Help for Real Estate Financing: Credit Scores

Each credit reporting agency lists your credit history as supplied to them by the individual lenders and includes governmental records. Each report assigns a credit score number to you. The credit scores reflect your theoretical risk of default to the lending institutions.

Software developed by Fair Isaac and Company generates your “FICO score.” Equifax bases scores on BEACON programs and TransUnion bases scores on EMPIRICA models.

You have three credit scores, often called FICO scores, one from each credit bureau. The lender takes the middle score as your baseline.

How Lenders Rate You

Credit score Available mortgage financing
720 – 800 Superb! You get what you want
700 – 719 Wonderful! You get top rates & terms
680 – 699 Good! You get good rates & terms
660 – 679 All right. You pay higher costs & rates
640 – 659 Okay score if good income
620 – 639 Weak. You need good income & some money
600 – 619 Poor. Use creative loan broker & pay more loan costs
580 – 599 Almost impossible without large down payment
Under 580 Work on fixing credit without delay

What Does Not Count In Your Credit Score

The scoring model doesn’t compute:

Age & gender
Race
Whether you own a home or rent
Length of time at your current address
Job or length of employment at your job
Income
Education
Marital status
Whether or not you’ve been turned down for credit.

Real estate lenders don’t just consider your credit score when you apply for mortgage financing. Understanding your credit score helps you with this one part of your mortgage requirements.

credit help for mortgage financing