Now, you see yourself in your dream home, but how will lenders see you? Your credit score is used by lenders to determine your credit risk and the interest rate you will be charged. You have three FICO scores from each of the three credit bureaus -- Equifax, TransUnion, and Experian.
Why is your credit score so important? Well, the difference between one score and another is the interest rate you'll receive. And, the difference between even the closest interest rates could end up costing you thousands of dollars over the life of you loan! A poor credit score could make your dream home unobtainable by making the monthly payments too high. If the lenders are monitoring your credit score - you should too!
So what is a credit score comprised of?
1. Payment History (35%)
In other words, have you paid past credit accounts on time?
2. Debt-to-Income Ratio (30%)
The amount of total recurring debt you owe compared to your gross monthly income
3. Length of Credit History (15%)
How long your credit accounts have been established
4. New Credit Accounts and Inquiries (10%)
Any new or recent credit accounts opened and how many inquires you have had on your credit by other lending/credit agencies
5. Diversity/Types of Credit (10%)
Your mix of credit cards, retail accounts, installment loans, mortgage loans, etc.
Most importantly, there could be false information on your credit score that you could stand in your way of a mortgage. You might not want to purchase today, but don't wait until your dream home hits the market to be surprised with a low score or incorrect information. Find out today how your credit looks.