“Ask Your Mortgage Professional”                            

Lending Options Limited By Your Credit Score? 

Your credit score affects many aspects of your personal life. You can pay thousands of dollars more in interest, fees and severely limit your financing options because of a low credit score.  While we all know about credit scoring it has often been an illusion as to how they come up with the actual credit score.  Let’s take a quick look at what will influence your credit score. 

Payment History:  35% Impact 

Your payment history is based on your past performance of paying your bills.  Paying your obligations on time and in full will have a positive impact on your credit score.  Late payments, judgments and charge offs will have a negative impact on your credit score.  Delinquencies that have occurred in the last 12 months will have more consequences on your score than older items.   

Outstanding Credit Balances:  30% Impact 

This is based on the ratio of your available credit limits versus the amount owed on those credit lines.  Maxing out your credit limits will have a negative impact on your credit score.  Ideally you should keep your balances to credit limits below 10% of available cash. 

Credit History:  15% Impact 

The length of time you have established credit will improve your credit score.  A consumer that has established credit early on in life will benefit more than a newer consumer that only has a few months of credit history.  

Type of Credit:  10% Impact 

A healthy mix of installment loans (auto loans), credit cards, and mortgages will have a favorable impact on your credit score.  A high concentration of credit cards will have a negative impact on your credit score.  

Inquires: 10% Impact 

This quantifies the number of inquiries that have been made on a consumer’s credit history within a six month period.  Each hard inquiry can cost from 2 to 50 points on a credit score, but the maximum number of inquires that will reduce the score is 10.  So if you have 11 or more inquires in a 90 day period it will have no further impact on your credit score.  

Remember, a computer does not take into consideration any personal factors when calculating your credit score.  When your credit report is run it is simply looking at today’s snapshot of your credit profile.  Your credit score can fluctuate dramatically within a course of a month, depending on your personal credit use and activity.  If you are in the market to purchase a home or refinance your current home consider your credit activity, making sure not to do anything that will have a negative impact on your credit score.   

If you have questions or comments please email them to [email protected]  

Call Andrew today at 573-302-0600.   

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