Good Credit Score?
The property market is no game - it has its up and its downs

The word Credit Score in itself always feels like a dark cloud hanging over your head either because you have no idea what those three little digits are or are to scared to actually find out.  However when trying to buy your dream home or even a new car those three little digits play a very big role in whether or not you get that YES! or NO!.

What is a Good Credit Score?

Your credit score basically lets the lender know your financial power and how likely you will be able to repay the loan. The higher your score the more likely your are not to default on the loan the lower your score the greater chance of missing payments or not making payments at all. Your credit score will also determine what type of loan you qualify for and at what interest rate and terms.

Good Credit VS. Bad Credit

Fair Isaac Corporation or better known as FICO is considered to be the most accurate credit score you can obtain scores range from 300 to 900. In the United States the average credit score is about 740. How your credit score is calculated is somewhat of a mystery but FICO has disclosed a breakdown of the things taken into consideration when determining your score.

  1. Payment History –  This will make up 35% of your score
  2. Amount of Monthly Debt – This will make up 30% of your score
  3. Credit History – How long have you been using credit this will make up 15% of your score
  4. Type of Credit- This will make up 10% of your score and will look at the type of credit used such as monthly payment, installments or revolving
  5. New Credit – This will make up 10% of your score and will look at what new credit has been opened

Range of Credit Score

720 and above – Excellent Credit

660 – 719          – Good Credit

620 – 659          – Fair Credit

619 & Below     – Poor/Bad Credit

What impacts your score?

Any late payments on credit cards, car loans, college tuitions etc. can heavily impact your score. If there’s one or two missed payment that won’t have a big affect; but if you are continuously late every month you will see a drop in your score. Foreclosure’s, bankruptcies and judgement can really put a damper on your credit history. The more of these inconsistency that show up the more a lender will be concerned about your ability to pay and manage your debt.

Poor/Bad Credit

If you happen to be in the poor/bad credit category luckily it is not the end of the world and there are several steps you can take in order to get those numbers up.

  • Paying down your current debt
  • Continuously making monthly payments on time
  • Regularly reviewing your credit report for any errors and correcting them

Depending on how low your score is there will still be lenders that are willing to give you a loan but your interest rate and terms will be higher and upfront fees will be required since a lower credit score is at a higher risk to default on the loan.

Be careful just as there are ways to raise your score there are also ways in which you can hurt your score too such as:

  • Closing out an account so your can remove it from your report remember lenders want to see a credit history that you are able to maintain a debt for a long period of time.
  • Opening up too many credit cards in a short period of time; try to limit the amount of credit cards opened unless necessary.
  • Shopping around for a lower interest rate every lender you go to will have to pull your credit report so if your shopping around for the lowest interest rate and have gone to 5 different lenders your credit will be pulled 5 different times this can significantly affect your score.

You are entitled to one free credit report every 12 months but can check it regularly without the scores to check for any inconsistencies or to correct any errors that may appear. It is also very important to check and make sure you have not become a victim of identity theft and checking your credit report is one of the best way.

It is extremely important to always be aware of your score. It is a measure of not only your buying power but your financially responsibility your goal is to have it has high as possbile. Keep in mind when starting the process of house hunting your credit score is the biggest criteria any lender will consider in the mortgage application process.