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Contact  Credit Score Credit Score Influences
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A favorable credit score is necessary to acquire lower interest rates and monthly payments, which is ultimately the desired goal when applying for any kind of loan. The higher the credit score number, the better. What goes into figuring this score?
There are a number of elements that affect your credit score, so by analyzing the five main components, you can understand what behaviors to act upon and which to stay away from to get your score at its best. The following is a list and percentages from Fair Isaac’s Corporation (FICO):
Payment History (35%) Payment history includes detailed information on late and missed payments and how frequently they occurred. Be sure to make on-time payments every month. Amount Owed (30%) This is the total amount of debt on every single account and how close you are to the limit on each one. Credit History (15%) This is how long you have been building credit including the number of years you have used each credit card and how long it has been since you last accessed each account. New Credit Inquiries (10%) These are all the credit cards you have recently sought out. Do not open too many credit cards because it increases the amount of potential debt you can have increasing your risk factor. If the inquiries are made close together, as in, about a week’s span, they will be lumped together and counted as one inquiry. Types of Credit (10%) This includes all types of credit such as credit cards, installment loans, and department store credit cards.
Debt-to-Income RatioThe debt-to-income ratio is an influential factor for lenders when qualifying mortgages. This is the amount of recurring debt (monthly obligations such as mortgages, car and student loans not to be confused with items such as electricity, cable, and groceries) versus overall income. This number shows lenders how much home someone can afford.
For example, if $500 is spent monthly on loan and mortgage payments on a $2000 a month income, a 25% DTI is yielded. The maximum DTI a lender will consider is generally 40%. Anything greater than that will be extremely difficult to obtain although there are always exceptions in special cases. |
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Know Your Credit Rating!
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Consumers have been hearing a lot about the importance of keeping tabs on their credit ratings.
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