6 Things That Impact Your Credit Score & How To Take Control Once & For All
Are you considering purchasing a home in the near future?
Have you given much thought to your credit score lately?
Most of us really don’t think about it until we need it, so you’re not alone if you answered “No.”
I found that many of my buyers forget or haven’t been taught how important this number rating matters to your lending qualifications and ultimately your monthly mortgage payments.
This can seriously make or break your home buying power.
I was checking out my credit score update recently through the service CreditWise provided through my Capital One Venture Card – not an advertisement – and I wanted to share the tips they have and demystify how your credit score is calculated for all the prospective and current buyers out there.
The Breakdown – 6 Things That Impact Your Credit
1. ON-TIME PAYMENTS
Your history of making on-time payments indicates to lenders whether you’ll make payments on-time in the future. CreditWise rates on a percentage % scale to let you know where you’re at. The goal here is 100% to show you pay your bills on time.
2. OLDEST CREDIT LINE
To lenders, the age of your oldest account indicates how much experience you have handling credit. The longer you’ve had an open line of credit with the same creditor the better. So it may be wise to leave your oldest account open while preparing to purchase a home, even if you don’t use it.
3. CREDIT USED
Lenders are looking for signs of responsible credit usage, and the less you use, the better it is for your score. Again, CreditWise rates you on a percentage % scale. The lower your number the better, which means you have a lot of credit available to you to use. Let’s say your number is 20%, this would mean you are currently using that percentage of your total available credit.
4. RECENT INQUIRES
With some exceptions, lenders tend to interpret too many recent inquires as a sign of risk, so the fewer the better. The rule here is to keep your credit inquires to a minimum. Examples of an inquire: new credit card applications and mortgage pre-approvals.
5. NEW ACCOUNTS
Lenders see opening too many new accounts in a short window of time as an indication of credit problems. This one is pretty straight forward; you’ll want to avoid having opened many new accounts within the past 2 years.
6. AVAILABLE CREDIT
Plenty of available credit (relative to amount owed) indicates to lenders that you manage credit responsibly, the higher this number, the better. They look at all the available credit you have across all your accounts. In the example I used above, if you are using 20% of your credit, that means you have 80% available credit to you.
Knowledge is power right? And with this knowledge you can now take your credit score into your own hands and make lasting changes to your habits and your score. My advice is to understand where you stand now and start to make improvements where you can immediately.
Cheers to better credit!
Jacqueline Van Metre
*Capital One, “What Impacts Your Credit,” accessed January 14, 2019, https://creditwise.capitalone.com