Credit Reports: It’s Important To Understand Your Score

How Does Your Score Stack Up?

A credit score is a 3-digit number ranging from 300-850 and is a rating of risk. This score gives a potential lender an idea of how likely a person is to responsibly repay a loan. Borrowers with a higher credit score tend to be offered favorable lending terms like a lower interest rate due to less perceived risk. A poor credit score may cause a potential borrower to be turned down or forced to accept a higher rate of interest as an incentive for the bank to take on a riskier investment. All lenders have different requirements when they decide to extend credit to borrowers and a credit score is only one variable considered.

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Your credit score is a 3-digit number ranging from 300-850 and is a rating of risk. A credit score gives a potential lender some idea of how likely a person is to responsibly repay a loan. Lenders use all 3 credit bureaus and will generally take the middle of the 3 scores. Borrowers with a higher credit score tend to get the most favorable lending terms like a lower interest rate because the lender feels less risk. A poor credit score may cause a potential borrower to be turned down or forced to accept a higher rate of interest as an incentive for the bank to take on a riskier investment. All lenders have different requirements when they decide to extend credit to borrowers and a credit score is only one facet they look at. They also consider your employment history and other personal factors.

How Are Credit Scores Monitored?

Experian, Equifax, and TransUnion are the three main bureaus that monitor credit activity. These agencies receive information from creditors that reveal all credit transactions, such as credit cards, auto loans, and school loans. This information includes your balance, if you are still paying on the loan, if it is paid off, if the account is closed, and if you made any late payments.

Factors That Impact Your Credit Score

• Pay your bills on time, every time. If you’re having trouble paying a bill, contact the creditor
immediately. Don’t skip payments, even if you’re disputing a bill.

• Pay off your debt as quickly as you can.

• Keep your credit card balance well below the limit. A higher balance compared to your credit limit may impact your credit score.

• Open new credit sparingly. Applying for multiple credit accounts within a short time period may impact your credit score.

• Check your credit reports regularly. Request a free copy of your credit report and check it to make sure your personal information is correct and there is no inaccurate or incomplete account information. You’re entitled to a free copy of your credit reports every 12 months from each of the three nationwide credit bureaus.

Can I buy a home with low or imperfect credit?

Many lenders have options for would-be home buyers to get a mortgage when they have lower credit scores. A 580 credit score is a baseline minimum and Conventional loan requirements are 620. Scores over 740 are ideal when buying a home.

Have Questions? Our Loan Professionals are here to help!