What You Need To Know About Your Credit Score When Buying A House in A Real Estate

If you’re planning on buying a house in a real estate, it’s an excellent idea to know about your credit score. What is it and how will it affect your loan payments and interest rate. So as early as now, it is a great idea to take the necessary steps to improve your credit score. This way, you will have more loan options to choose from including homebuyer assistance program Houston when the time comes.

What’s in your credit score?

You may only think of your credit score as just a simple reflection of your payment history. However, it’s more than that. It is made up of several variables namely the amount owed, payment history, new credit, length of credit history, and types of credit used. Each one of these has a certain percentage on your final credit score so let’s take a look at each one and how it affects your overall FICO score.

New Credit

It consists of ten percent of your overall credit score. It refers to your pursuit of new credit which includes some new accounts and credit inquiries.

Credit Types Used

It consists of ten percent of your overall credit score. It’s all about the number of accounts you open including the different credit types, such as installment plans and revolving cards.

Length of Credit History

It consists of fifteen percent of your overall credit score. It refers to how long you’ve opened your accounts and how long you have been paying off and using your credit.

Amounts Owed

It consists of thirty percent of your overall credit score. It is the amount of money you owe your accounts in comparison to your credit limits. To know if you have maxed out, check your debt to credit limit ratio. Your account’s credit amount has a heavyweight in determining your credit score.

Payment History

Finally, the most significant contributor to your overall credit score is the payment history at 35 percent. This usually includes past due and late payments.

How to improve your score?

Now that you know what contributes to your credit score, you can quickly improve it. Here are some ways to do so.

  1. First things first, ask for a copy of your report and check your score. See if you find any errors and have these corrected.
  2. Pay on time. Your payment history is 35% of your overall credit score so if you want to increase your credit score, start by paying on time.
  3. Afterward, check the list for the next most weighted item and reduce your amounts owed.

Think of a payment plan and a realistic goal which will allow you to pay the outstanding balances.

And that’s about it. Before you go and purchase a house, check your credit score first. If you find that it is low, start improving your score by using the guidelines stated above and build on time payments so your previous late payments can be disregarded. Your credit score is essential to help determine your monthly payment and interest rate when you are going to buy a house.

Terry Cantrell

You must be logged in to post a comment Login

Leave a Reply