What To Know About Credit Scores When Buying A Home

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Did You Know?

  • 39% of Americans admit they do not know their credit score*
  • 52% of Americans do not know that paying their bills on time is the factor that has the greatest impact on their credit score*
  • 90% of Americans recognize the importance the access that credit plays throughout their lives*

What Composes A Credit Score?

Which Credit Score Is Most Important?

Chances are when it comes to your credit, you’ve heard about FICO, and Experian, and Vantage, and more, but what do they all mean, and what are the differences?

First of all, Experian, TransUnion, and Equifax are the three main credit bureaus, and they all came together about a decade ago to create their own version of their credit score model called the VantageScore. However, each has different information about you, so even though they use the same model to gauge your score, all three can still give you a different result. Then, there’s the FICO Score, which is the oldest and most widely-used scoring model allegedly used by 90% of top lenders to judge your worthiness. Now, this is the one that you hear most about in commercials and is usually offered to you monthly by your credit card provider. In essence, FICO is like Google or Amazon, but Vantage still has market share and is in gaining in popularity.

Which Score Is Best To Use?

You can find out what kind of methodology your lender uses, but it’s always your best bet to keep your credit history clear and strong, so that you’re gonna come out with a higher score no matter what model is used to get your loan.

How To Regain Trust With Lenders

  • Keep credit card balances low. It is ideal to keep it at 30% or below your max limit.
  • If you have two credit cards, one with a maxed out balance and the other with no or little balance, transfer part of the debt from the maxed out card to the other to get both balances as close to 30% as possible
    • Example:
      • Visa: $10,000 of $10,000 credit limit
      • Mastercard: $ 0 of $10,000 credit limit
    • Transfer to:
      • Visa: $5,000 of $10,000 credit limit
      • Mastercard: $5,000 of $10,000 credit limit
  • When you close a long term account, like a car loan, it will initially cause your score to go down.
  • If you have a “CHARGE OFF” that does not mean you do not owe that debt. It means they have written it off their books and it becomes a collection when it’s sold to third party collection agency.
    • When it comes to deciding if you want to settle the account or do a payment plan, consider the age of the account.
    • Lenders just want to see that you have been responsible for dealing with it. They do not care if you settle it for pennies on the dollar or pay in full.
    • If you do a settlement, obtain a letter stating the terms PRIOR to making the settlement.

Want To Purchase A Home?

Be sure to always consult a lender PRIOR to repairing your credit or making any decisions. They can give you the best path forward to repairing your credit and being able to qualify for a home loan.

Want To Check Your Credit Score?

Head to any of the sites below to

CreditKarma.com

FreeScoreOnline.com

NerdWallet.com

CreditSesame.com

Quizzle.com (for Homebuyers)

AnnualCreditReport.com

Experian

TransUnion

Equifax

If you’re ready to make your dream of homeownership a reality, please don’t hesitate to reach out with any questions or needs. I’m always happy to help!

 

**Source: https://finance.yahoo.com

 

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