There are plenty of issues that change your credit score and many ways to improve your credit score in a matter of weeks . As Home Loan Credit Score shows you , very often your score can be brought up by simply addressing some items that you’ve overlooked or didn’t notice. That’s why it’s essential to check your credit report regularly . By paying attention to , and dealing with issues like late payments, the amount of credit you have uncommitted, and the number of requests you have for new credit, you can circumvent many of the credit pitfalls and even work to improve your recent credit situation.
You might be interested to learn just how much your FICO score really has to do with the interest rate you get on your home loan. Just raising your FICO 50 points can save you hundreds of dollars annually on your mortgage payment. If your mortgage payment is $1,080 at a 5.051% interest rate that same payment at a 4.829% interest rate would be about $1,050. That’s $360 a every twelve month , or $10,800 throughout the payment history of a 30 year mortgage. If you improve your credit score 100 points, those numbers more than double. The most unbelievable thing about this is that in many cases you can strengthen your FICO score approximately 125 points in less than 2 months.
Considering that such a piffling reduction in your interest rate can drastically reduce your mortgage payment, it’s a good idea working at getting your FICO score increased as much as you can before applying for a mortgage. To do this, you should address 5 areas of your credit report.
35% of your credit score is associated with your payment history. This area is related to any late payments you may have, bankruptcies, charge-offs or collections and can have some unwanted results on your credit score. Information in this area can be disputed if it’s not accurate , but should be done with the steering of a Credit Score Professional.
30% of your FICO score is related to existing debt. By keeping your debt at no more than 50% you can improve your credit score. By keeping your balances below 25%, you are displaying behavior that is acceptable risk to lenders and this can lead to considerable enhance score.
15% of your score is based on the length of your credit history. Keeping accounts open for as long as possible can improve your credit score. Ideally, you should work to have accounts that are open for longer than 7 years. This area can be worked on by limiting the number of accounts you close and not transferring old account balances to new accounts.
10% is related to the kind of credit you use. By keeping a nice array of different types of credit, having many accounts that are installment loans, revolving accounts and mortgage loans you can contribute positively to your FICO score. It’s also helpful to avoid high risk “consumer finance institutes.” These types of accounts can reduce your credit score because they’re considered to be last resort creditors.
The final 10% is concerned with new credit. This area associates to how long it’s been since you opened your newest account. Also having more than 4 inquiries on your credit history within a 6 month period can reduce your score.
To learn more about how you can increase your credit score and how to more wisely manage the different pieces of your credit, look into Improving Your Credit Score, and Review Your Credit Report.
This article is written by Morgan Best.
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