Take Your Credit's Temperature Before You Buy!
Buying a home at the Lake of the Ozarks is a big decision. It would be a bummer to find the home of your dreams only to get denied a home loan, or not be able to afford the payment, due to a low credit score. Your Favorite Real Estate Team has the best real estate agents at the Lake of the Ozarks, and we are here to help you with everything you need to know about buying a house.
Getting approved for a home loan is a big part of the process, so it's important to make sure you are ready for it. Today's blog is all about credit scores and what you might not know about how they are calculated. (Please note that we are not financial advisors, so it's best to consult a professional advisor or loan officer before making a decision.)
What Affects Credit?
Credit scores can be confusing, but there are a few proven principles that make up the main influences of a person's credit.
- Payment History
- Credit Mix
- New Applications
- History Length
- Utilization
These elements combine to give lenders a snapshot of how reliable you are as a person so that they can be sure you will pay back their loan in full. Payment history shows weather or not you pay your bills on time. If you pay an electric bill one day late, it likely won't show up on your credit. Late payments that affect credit are more often the ones that get sent to a collection agency. Your credit mix shows lenders that you know how to handle multiple kinds of accounts like a car loan, mortgage, credit cards, etc. New applications for credit show lenders how stable you are as a borrower. If you have applied for a significant amount of credit all within the last month, this could throw up a red flag to lenders. Your credit history length shows lenders that you have been able to successfully manage credit for a long amount of time. If all of your accounts are new, then it could show that you are untested in how to handle lines of credit. Utilization is a calculation of how much of your available credit is in use. For example, if your credit card limit is $10,000 and you have $5,000 of debt on the card, then your utilization is 50% which would be pretty high. It's best to keep your utilization rate under 30%.
What Does My Score Mean?
All of these factors combine together to create a number, and that is your credit score. Credit scores are graded on a scale of 300-850. The scale below can help give you a general idea from Experian about what score could be considered fair, good, or excellent.
- Exceptional: 800-850
- Very Good: 740-799
- Good: 670-739
- Fair: 580-669
- Very Poor: 300-579
More Information About Credit
Most people think that their score is one set number that they can depend on, but that isn't necessarily the case. There are three different credit bureaus, each of which might use a slightly different algorithm to calculate your score. Additionally, different factors are considered for different kinds of products. Did you know that there is a Mortgage Score that could be different from your General Score? Before you "put all your eggs in one basket", make sure you check an accurate source that can show you each of your possible scores. One of those great resources is MyFICO.com.
Buying a Home at the Lake
If you are thinking about buying a home at the Lake, it's important to take a look at your credit score and see if it needs work before you apply for a mortgage. Once you're ready to find the home of your dreams, contact the best real estate team at the Lake of the Ozarks - Your Favorite Real Estate Team!
CONTACT ED SCHMIDT FOR ALL YOUR LAKE OF THE OZARK REAL ESTATE NEEDS
Ed Schmidt, REALTOR
752 Bagnell Dam Blvd. Suite A
Lake Ozarks, Mo 65049
Phone: 573-240-9052
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