Credit Score and Home Loans – Prattville, AL – Part 2

Credit Score and Home Loans – Prattville, AL – Part 2

 

Yesterday we talked about two of the five categories that make up a credit score.  Today we’re going to talk about the other three categories and tie everything together.  Remember that having a good credit score is really important if you want to buy a home in Prattville, AL or anywhere else in the River Region.  Yesterday we talked about the first two categories, Payment History and Amounts Owed.

 

Credit Score and Home Loans - What Makes Up Credit ScoreThe third category that makes up your credit score is Length of Credit History. This category looks at the length of time each of your accounts has been open and also the time since your last activity on each account.  So your accounts that have been opened longer get a higher score in this section than the accounts that you have just recently opened.  Having too many accounts that have been opened recently may lower your credit score in this section, so the best advice for home buyers is don’t open any new accounts right before applying for a home loan.  The Length of Credit History category accounts for 15% of your credit score.

 

The fourth category that makes up your credit score is New Credit.  This category looks at the number of accounts you have recently opened, the number of inquiries into your credit report by creditors, and how long ago that you re-established positive credit history after a previous time of payment problems.  Having lots of inquiries by creditors on your credit report makes it look like you have gone all over town trying to find someone to give you credit or give you a home loan.  This can really lower your credit score in this category. 

 

The final category is Types of Credit Used, which looks at the different types of credit accounts you have, such as credit cards, store credit cards, auto loans or other installment loans, consumer finance accounts and other mortgages, and also looks at the number of accounts you have of each type.  Having too many of one type of account, such as consumer finance accounts, compared to the other types of accounts, makes your credit history look unbalanced, so your credit score for this category may be lowered if your credit accounts look unbalanced.  The New Credit and Types of Credit Used categories both account for 10% of your credit score.

 

So there you have it.  The most important thing you can do is pay your credit accounts on time every month.  Remember that Payment History accounts for 35% of your credit score.  The next most important thing you can do is keep your Amounts Owed under 50% of your available credit on revolving accounts such as credit cards.  Home buyers save money on home loansDoing these two things every month will help bring your credit score up dramatically in as little as six months to a year.  And when you’re eager to buy a home, having your credit score up as high as possible will help you get the best interest rates and open up the most home loans programs for you, which can possibly save you thousands of dollars over the life of your home loan.

 

Now that you know more about what goes into your credit score and how credit score and home loans are tied together, you can keep a closer watch on what you do with your credit cards, loans, and finance accounts every month, which will help you buy a home in Prattville, AL or somewhere else in the River Region.

 

Credit Score and Home Loans – Prattville, AL – Part 2

 

 

 

 

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