Understanding Your Credit Score
A credit score is what lenders utilize to determine and evaluate what risk is associated with lending someone money. A credit score is typically needed before opening up a new line of credit, auto loan, a mortgage, or any other type of loan. Navigating a credit score report may be confusing, so here are the top things you need to know to understand your credit score.
A credit score will range between 300-850. The higher the score, the better credit you have. Typically, a good credit score is considered to be around 720 or higher.
Factors Affecting Your Credit Score
There are several factors that go into determining a credit score. The biggest factors are:
- Amount of Money You Owe: Owing large sums of money on credit accounts will typically lower your credit score.
- Payment History: Submitting payments on time and paying off loans yields a higher score.
- New Credit: People who have opened up several new credit lines in a short period of time are considered high-risk.
- Length of Credit History: A credit score will determine how long your credit lines have been opened, from your oldest account to most recent.
- Credit Mix: This evaluates the types of credit you have. Having a well- rounded history of credit (auto, mortgage, retail, etc.) is good, but do not open accounts you do not intend to use.
Your Score Will Change
If you are unsatisfied with your score, know that it will change over time. For example, making a payment on a credit card or paying off a car will affect your score.
Who Determines My Credit Score?
There are three credit bureaus, Equifax, TransUnion and Experian, which will provide all the credit, work and living address history they have on you when a credit score is requested. This will include employment history, work and home addresses, loan history, credit card history, and any other relevant information. Your credit report will include what is most heavily affecting your score.
If you are applying for a mortgage at Home Point Financial Corporation, we will work with you to determine how we can help. We understand our clients are more than a credit score, so we utilize a wide range of factors in determining your loan status. Learn more about our loan programs today!