Your Credit Report

First Time Home Buyer's Guide to Credit Scores

Your Credit Score is a fluid number that changes as your credit report changes. Therefore, any change to your credit report could impact your credit score. Here is some helpful information to take into consideration while you apply for a home loan or prepare to purchase a home:

The Players

Equifax, Transunion, Experian

How Credit Scores are Weighed

35% in established from your payment history, collections and public records (bankruptcy, liens, etc..)
30% is established from your outstanding balances being carried on your accounts. Balance as opposed to limit. This an important reason not to use the maximum credit available on credit cards, it can lower your score even if your payment history is excellent.
15% is based on your length of credit history. It is better to have credit for longer time frames. Credit repair experts recommend paying down or paying off the credit cards but leaving them open. The difference between the limit and balance can improve your overall credit rating.
10% is established around the type of credit you have (mortgage, installment, lease, revolving)
10% is established around your request for credit (inquiries) meaning that every time you apply for credit your scores are impacted with certain FICO rules. FICO rules typically allow for more than one credit pull when you are purchasing or refinancing a home understanding that it may take more than one credit pull to complete the process.

How to Obtain a Copy of Your Credit Report

Consumers can request a copy of their credit report annually which is an excellent way of proactively managing your credit scores. This can be done by contacting the three credit bureaus directly. You can visit them online at:

Since your credit score is a very important part of your home loan approval, what type of home loan you are able to receive and ultimately if you can obtain financing now, working on your credit now can make the difference in buying a home.

Repairing Your Credit

If you're facing complicated credit issues, you may want to consult with a professional credit repair company. Before you do, make sure you familiarize yourself with FTC regulations and information to be certain you are dealing with a reputable firm. Credit repair is not the only way to improve your scores; it's possible to make good scores even better by taking steps like these:

Evenly distribute your credit card debt. The goal here would be to change the ratio of debt to available credit as mentioned before by evenly distributing the debt between the cards until you can bring the balances down or pay them to zero.

Keep you existing accounts open and active. Mandy consumers are anxious to close accounts with a zero balance, but this can truncate credit history and work against a positive debt-to-available credit ratio.

Keep credit inquiries to a minimum. Each inquiry into your credit can impact your scores anywhere from 2-50 points. If you have already been approved for a home loan, a good rule of thumb is to not buy anything or allow your credit to be pulled for other purchase until after you have closed on your home. Ask your Mortgage Consultant for more information on this.

Taking steps to improve your positioning will help cultivate a more fruitful financial harvest, putting you that much closer to obtaining the home of your dreams.

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