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.

Get an FHA Refinance Loan
Get an FHA Purchase Loan
FHALoan.com
Get an FHA Refinance Loan
Get an FHA Purchase Loan
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.

------------------------------

RELATED VIDEOS:
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

FHA Loan Articles

What to Do About High Interest Rates?

Mortgage rates are hitting prospective homeowners hard this year and are approaching 8%, a rate that didn't seem very likely last winter. With so many people priced out of the market by the combination of high rates and a dwindling supply of homes.

What to Know About the FHA Handbook

The FHA Handbook serves as a crucial resource for mortgage lenders, appraisers, underwriters, and other professionals involved in the origination and servicing of FHA-insured home loans. It outlines the policies and requirements for FHA-insured mortgages.

Some Important Points About FHA Rehab Loans

FHA rehab loans are a specialized type of mortgage loan offered by the Federal Housing Administration that allows borrowers to finance both the purchase or refinance of a home and the cost of needed repairs.

Important FHA Loan Terminology

Borrowers considering an FHA loan should be familiar with some basic loan terminology. These loans are popular among first-time homebuyers and those with lower credit scores because they often offer more flexible eligibility requirements and lower down payment options.

Similarities and Differences Between Co-Borrowers and Cosigners

You may have heard the terms co-borrower and cosigner in connection with your FHA loan process, but aren't sure about the distinction. Both a co-borrower and a cosigner can help a primary borrower qualify for a mortgage, but they have different roles and responsibilities.

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