LoanCentral's Real Estate Lending Blog

HOW YOUR CREDIT SCORE IS DETERMINED

There are five factors that comprise your credit score. They are listed below in order of importance:

Payment History: 35% impact.

Paying debt on time & in full has a positive impact. Late payments, judgments & charge-offs have a negative impact. Missing a high payment has a more severe impact than missing a low

payment. Delinquencies that have occurred in the last two years carry more weight than older items.

Outstanding Credit Balances: 30% impact.

This factor marks the ratio between the outstanding balance & available credit. Ideally, the consumer should make an effort to keep balances as close to zero as possible & definitely below 30% of the available credit limit when trying to purchase a home.

Credit History: 15% impact.

This marks the length of time since a particular credit line was established. A seasoned borrower is stronger in this area.

Type of Credit: 10% impact.

A mix of auto loans, credit cards, and mortgages is more positive than a concentration of debt from credit cards only or finance company accounts.

Inquiries: 10% impact.

This quantifies the number of inquiries that have been made on a consumer's credit history within a 6-month period. Each inquiry can cost from 2 to 50 points on a credit score, but the maximum

number of inquiries that will reduce the score is 10. In other words, 11 or more inquiries in a six-month period will have no further impact on the borrower's credit score

Mortgage rates are directly tied to your credit score. It is important to contact your LoanCentral mortgage professional as soon as you are thinking of purchasing a new home to make sure your credit scores are the best they can be. We can help advise you on steps you can take to improve your scores to help get you the lowest possible interest rate.