Did You Know?

FHA loans are one of the best options for young, first-time home buyers who have not had as much time to save for a large down payment or establish a high credit score.

Click to Start Your Refinance or Purchase Loan

What Your Credit Score Says About You

What Your Credit Score Says About You

The term, “credit score,” tends to be a source of anxiety for many Americans, because they realize the weight it holds when it comes to getting a loan for nearly anything. A home, a car, even a cell phone. Taking the mystery out of this 3-digit number goes a long way to helping people understand and increasing their score, so here we go. 

What is a Good Credit Score? 

Think of your credit score like grades you get in school. A higher grade means that the work you turned in was on time and of higher quality. It measures your academic performance. Your credit score measures your creditworthiness, and you are graded bases on a number of factors, and credit bureaus calculate it on a scale between the range of 300 to 850.

The higher this score is, the more lenders will trust you. A high score represents a borrower who makes repays loans and makes his payments on time, making you less of a risk in the eyes of lenders, giving them more incentive to grant you credit with a lower interest rate.
What Goes into Your Credit Score? 

One of the main credit scoring formulas used in the U.S. is the FICO score. All major credit bureaus in the U.S.—Equifax, Experian, and TransUnion—calculate credit scores using FICO's algorithm and information they have collected about people's credit history. It is based on five factors: timely payments (35%), total debt (30%), the age of credit (15%), new credit (10%), and the type of debt (10%). Let’s talk about each of the aspects.

Timely Payments: The first factor is easy enough to understand; to be considered creditworthy, you need to make payments on your loans on time. This can mean making your mortgage payment on time, and even your credit card balance.

Total Debt: Your total debt, which affects 30% of your score, is the amount of money you owe, relative to your credit limits. The more you owe, the riskier it is for you to take on new debt, lowering your credit score.

Age of Credit: Having a longer, more established credit history is advantageous because it gives lenders more information about your spending habits. A longer history of reliable borrowing means your score will be higher.

New Credit: This refers to lines of open credit. If a borrower has opened a number of new credit lines in a short amount of time, it indicates to lenders that they are having financial trouble and cannot manage their money well.

Type of Credit: This is especially helpful for new borrowers who don’t have a long credit history. It helps to have different types of credit lines because it shows lenders that you are able to handle various finances.

While it is good to know what goes into your score, you also need to know what doesn't affect your credit rating. While credit applications can affect the score, "soft" credit checks do not. The score is not based on sex, race, marital status, religion, nationality, or age. Information about where you live, your job, salary, or the interest rates on your credit accounts is not factored into the score either.


You're Almost There When You Get Your Loan Approval
Learn About the Mortgage Insurance Premium (MIP)
Pre-approval Starts the Mortgage Process
See Your Credit Scores From All 3 Bureaus
See Your Credit Scores From All 3 Bureaus

More FHA Loan Articles

Getting Approved for an FHA Loan

While an FHA home loan is a good option for first-time homebuyers who don’t have enough money saved for a large down payment, it’s important to understand the ins and outs of the FHA guidelines, and what it takes to get approved as a borrower. 

When Buying with an FHA Loan, Don't Skip the Home Inspection

This wait isn’t easy when you've been shopping for a new home. But getting a home inspection is a crucial step, and not one you should consider skipping. Make sure you hire a reliable home inspector, wait for your inspection report, and watch out for these red flags. 

Is it the Right Time for an FHA Refinance?

With historically low interest rates, the mortgage industry has seen a sharp uptick in refinances. Taking advantage of the current market might be in your best interest and could lower your monthly payment significantly. Don’t forget that refinancing a mortgage comes with closing costs.

Things to Know About Making an FHA Loan Down Payment

Many first-time homebuyers need some help understanding and navigating the ins and outs of the mortgage process, and down payments are an essential part of that. A down payment is an upfront installment made on a large purchase while the remainder is paid off with a loan.

Let's Compare FHA Loans to VA, USDA, and Conventional Mortgages

Buying and financing a home is complicated and can become overwhelming. It's important for you to stay informed, and know what your options are. So, start with the basics and read about the four different mortgage types available before approaching a lender.

-- Find More Articles in the FHALoan Library --

FHALoan.com is not a government agency. We do not offer or have any affiliation with loan modification, foreclosure prevention, payday loan, or short term loan services. Neither FHALoan.com nor its advertisers charge a fee or require anything other than a submission of qualifying information for comparison shopping ads. We do not ask users to surrender or transfer title. We do not ask users to bypass their lender. We encourage users to contact their lawyers, credit counselors, lenders, and housing counselors.

SecureRights Advertiser Contact Information