Your credit score is a measure of your financial health, and shows lenders their level of risk if they lend you money. Your credit score is a number. Usually it falls between 300 to 900. Higher the score means better credit. A credit score above 700 proves you manage your credit well, paying your bills on time, meaning a lender should feel comfortable to lend you a money.
Factors That Influence Your Credit Score
Each credit-reporting agency (Equifax, Transunion) uses their own proprietary formula to calculate credit scores. Below are the factors affecting the credit score:
- Payment History – Late or missed payments, overdue accounts, bankruptcies, and any written off debts will all lower your credit score
- Credit Utilization – How much debt you have as a percentage of your available credit will also affect your credit score (It is advisable to use 35-40% of your available credit for better score)
- Credit History – How long you’ve had accounts open (the longer, the better)
- New Credit Requests – How recently and how often you’ve applied for new credit (checking your own credit score will not affect your score)
- Types of Credit – There are several types of credits such as credit card, auto loan, line of credit secured or unsecured. Having a mix of these credit accounts is the best
Note: You can check your credit report from Equifax or Transunion and verify if there are any errors and anything to be done to correct the credit. If you exercise this option 3-4 months prior to your house purchase decision, it will help you a lot.
Copyright © 2021 Ranbir Sahota, Realtor @ HOMELIFE/MIRACLE REALTY LTD,Brokerage, Independently Owned & Operated All Right Reserved