Before you purchase a home, it’s a good idea to take steps to understand your credit worthiness. Speaking with a mortgage or financial adviser doesn’t need to be a nail-biting experience. One of the things you need to know is your FICO® Score. You may ask, “What is a FICO Score?”
A FICO Score is a three-digit number calculated from the information on your credit report. The number is determined by the math wizards who evaluate a summary of all your credit accounts and payment history, including late or missed payments.
The FICO Score will range between 300 and 850 and takes into account these factors:
Your payment history
Current level of debt (other mortgages, student, personal and car loans, credit card debt)
The types of credit used and length of credit history, which also includes the number of credit cards in your wallet
New credit applied for
Generally speaking, the higher your score, the more money you can borrow and the less you’ll pay for the loan. Lenders use these scores to estimate your credit risk – how likely you are to make your payments.
If you focus on keeping your FICO Score in the mid-700s or higher, you’ll likely qualify for the most favorable loan and credit options.
Here’s a few suggestions for a higher FICO Score:
Make all your payments on time each month
Keep your credit card balances low
Apply for new credit cards only when needed
Knowing how to keep your credit score healthy will help you on your way to your new home.
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