Credit Scores are determined by these 5 factors
According to National Association of Realtors ®, Credit scores range between 200 and 800, with scores above 620 wanted for attaining a mortgage. The Cowan Connection Team of Keller Williams Realty wants you to be informed and offers the following factors that will affect your score:
1. Outstanding Credit Balances have a 30% impact. Debt ratio of outstanding balance to available credit is important. Keeping that below 50% is wise and below 30% is even wiser. It is never a good idea to close an account; the debt ratio will go up and the number of seasoned lines will decrease. Pay outstanding debts down as close to zero as possible and evenly redistribute the remaining balance among the open lines. The increased interest incurred by moving a balance from 0% to 23% will be minimal relative to what the increased mortgage debt might be with a low credit score. Hitting the maximums of available credit can be negative. It may be worth calling and asking the credit company to increase you available credit to lower debt ratio, provided they can do so without a hard credit inquiry.
2. Payment History has a 35% impact. Paying your debt on time and in full has a positive impact, and late payments, judgments and charge-offs have a negative impact.
3. Credit History has a 15% impact. The length of time a particular credit line has been opened is important. A seasoned borrower is stronger.
4. Type of Credit has a 10% impact. A healthy mix of auto loans, credit cards and mortgages is positive, rather than a concentration in only credit cards.
5. Inquiries have a 10% impact. Hard inquiries for credit will negatively impact the score. Auto and mortgage inquiries receive special treatment; twenty inquiries can be made in a 14-day period for auto or mortgage, and they will be treated as only 1 inquiry. The maximum number of inquiries that will reduce the score is 10. Any inquiries beyond that [11+] in a six-month period will have no further impact on the borrower. Each hard inquiry can cost 2-50 points on a credit score.
Thank you to our preferred lender, Starkey Mortgage for the Credit Score Tips.
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