You are seriously thinking about buying a home… good for you! To qualify for the best mortgage rates, you’ll need a good credit score as lenders use your score to determine how credit worthy you are – how likely you are to make payments on time. Your lender will run a detailed credit report on you before agreeing to provide you with a loan, so it is good to have an idea what goes into a credit score.
How is a credit score calculated?
While your income is an important factor in obtaining a mortgage loan, your credit score has nothing to do with your income. The following is an approximate breakdown of how a credit score is determined:
35% is based on your past payment history
30% on amounts you owe on credit cards and other loans
15% is based on the length of your credit history or how long you have had credit
10% is based on new credit – the number of new accounts or recently opened accounts
10% is based on types of credit – a good payment history on different types of credit is a good thing.
A higher credit score means lower interest rates which saves you money over the course of your loan – a nice reward for being a responsible borrower.
Some simple tips to improve your credit score:
– Pay bills on time
– Keep low balances
– Be conservative when applying for new credit.
– Check your report for errors and correct them, if found
For more on credit reports, see this Shelter Mortgage credit report post
Remember, no big purchases while in the homebuying process
If you are in the process of buying a home, don’t make any drastic or expensive purchases that could alter your score and your available credit – possibly delaying your closing. Your finances are evaluated early in the buying process and later on in the process to be sure nothing has changed.
First Weber sells real estate throughout Wisconsin Metro Milwaukee and Southeastern WI, South Central Wisconsin/Greater Madison, Central Wisconsin, Southwest WI, Western WI, Northeast Wisconsin and Wisconsin’s great Northwoods. You can start searching for Wisconsin real estate and Wisconsin real estate agents at firstweber.com
To search for a Wisconsin mortgage lender, please see First Weber’s mortgage services section.