Usually referred to as a FICO Score, your credit score can range between 200 and 800. Most lenders consider anything above 720 a “sure thing.” However, some can obtain a home loan with a lower score depending upon the loan program. The higher, the better. Some of the factors affecting your score are:
- Length of Credit History. It’s frustrating to every young person who has a great paying job, but can’t get credit because they don’t have credit. There are ways to get credit. Store accounts are usually easy to get, but be very careful… they have very high interest rates and usually not very favorable terms. Pay them off in full each month!
- Your Total Debt Owed. Numerous loan accounts with large outstanding amounts due are often a sign of financial overextension.
- Payment History. The number of months you have paid your obligations on time is very important.
- New Credit vs. Old Credit. Recently opened credit lines can be a red flag to lenders. Let your credit lines age a bit before applying for a home loan to get the best deal.
- Types of Credit. Creditors like to see a well-rounded borrower. A home loan, auto loan, installment loan or two, a couple of credit cards, etc. demonstrates that you are a well-rounded borrower.