A credit score is one of the pieces of information that your mortgage lender will use to evaluate your application.  Financial institutions have been using credit scores to evaluate credit card and auto loan applications for many years.

How is my Credit Score calculated?

Credit scores are based on information collected by credit bureaus and information reported each month by your creditors about the balances you owe and the timing of your payments. A credit score is a compilation of all this information converted into a number that helps a lender determine the likelihood that you will repay the loan on schedule. The credit score is calculated by the credit bureau, not by the lender. Credit scores are calculated by comparing your credit history with millions of other consumers. They have proven to be a very effective way of determining credit worthiness.

What are some of the things that affect my Credit Score?

Your payment history, your outstanding obligations, the length of time you have had outstanding credit, the types of credit you use, and the number of inquiries made about your credit history in the recent past are just a few things that affect your Credit Score.

What’s a bad Credit Score and what’s a good Credit Score?

Credit scores used for mortgage loan decisions range from approximately 300 to 900. Generally, the higher your credit score, the lower the risk that your payments won’t be paid as agreed.  Most lenders require a minimum of a 620 credit score to be considered for a loan.  A credit score of 740 or better will normally qualify you for the best mortgage terms.

What are some things I can do to improve my Credit Score?

• Use credit cards wisely. Pay more than the minimum amount due. Paying credit cards in full or on time each month can help you build excellent credit.

• If you are married, establish credit independently.

• Honor your promise to pay on time. If you are experiencing difficulty making payments, contact your creditor or lender right away.

• Know what’s in your credit report. Request a free credit report at least once a year from www.annualcreditreport.com to ensure its accuracy.

You can take action to improve your Credit Score today.

No credit score lasts forever – it can change over time, and can improve over time. Managing your credit well will eventually result in a higher credit score.