Many people don’t really understand the factors that affect their credit score most, or how one factor may be more important than another. As experienced Flower Mound realtors, we understand that potential homebuyers worry about having a good credit score – you want to be credit-worthy when it comes to banks or lending institutions.
What impacts your overall credit score most? We’ll start from what influences it least, to what influences it most.
Trying to get new credit. This accounts for about 10% of your overall credit score, and is important because having numerous credit inquiries within a brief time period indicates you are trying to get more credit, a fact that makes lenders a bit nervous.
Types of credit. Having a diversified mix of credit helps your credit score, as long as you make payments in a timely manner. What’s a good mix? A home loan, auto loan, and a credit card or two. The types of credit you have account for about 14% of your overall credit score.
Longer history of maintaining good credit. If you have paid on credit cards, your home, or for other goods over a long period of time, you will have an easier time with lenders because they can see that your history of managing your credit is good. How long your credit history is makes up about 15% of your overall credit score.
How much debt do you have? Your level of debt accounts for a whopping 30% of your credit score. Having credit cards charged to the max is not a good idea. Try to keep balances on credit cards at 30% or less of the limit, as lenders know that when an individual has credit cards that are “maxed out,” it’s more difficult to take on additional payments. The less debt you have, the more capable you look to potential lenders of being able to take on additional expense.
How’s your payment history? Paying car payments, your mortgage, credit card bills, and even household utilities on time is the most important factor in your overall credit score, accounting for 31%. Try not to miss payments, or pay your bills late – this not only affects your credit score, it racks up late fees and penalties!
At Team Nelson, we understand how important it is to have a beautiful home you can call your own! Good credit is key in being able to purchase the home of your dreams. Have other questions regarding credit or other factors which could impact your ability to purchase a home in Denton, Frisco, or other cities in the Dallas area? Call our real estate professionals today.