Fixing Your Credit Score
January 10, 2023
To start improving your credit score, it helps to know what goes into making it. The factors that affect your score are:
- Timely payments: 35%
- Overall debt: 30%
- Length of credit: 15%
- New credit applications: 10%
- Types of credit: 10%
Know Your Score
You need to know what your score is if you want to get started on improving it for a home loan. According to the Fair Credit Reporting Act, individuals have the right to their own credit report, which is available from a credit bureau. You can request your report from these bureaus, the top three of which are Equifax, TransUnion, and Experian. Once you have your report, you can review it and dispute any discrepancies. The bureaus are responsible for investigating any disputes within 30 days.
Don’t Let Your Balance Go Past-Due
The most important factor that makes up your credit score is your payment history. 35% of your credit report depends on whether or not you make payments on time. The later you are on those payments, the worse it is for your credit report. Always try to pay off your credit balances in full. Not only does this keep you from incurring large interest payments, but having a “paid in full” remark on your credit report looks good to lenders considering you for a loan.
Building a Credit History from Scratch
Many first-time homebuyers run into the problem of not having a sufficient credit history. This can affect the 15% of your score that depends on age of credit. Establishing credit history can start with signing up for a credit card and using it to pay for everyday items. It also helps to set up utility payments through your credit card online. Just remember to pay off the balance on time!
Be Proactive About Opening New Lines of Credit
When applying for a loan or credit card, your bank or lender performs a “hard inquiry.” This is a review of your credit that in turn affects your score. If you submit multiple credit applications in a short timeframe, it shows up as a red flag for lenders. They might assume that you aren’t handling your finances well enough if you need multiple lines of credit open at once. It’s important that you don’t submit credit applications close to the time that you apply for a home loan.
Remember that your credit score represents your creditworthiness. Based on this number, a lender determines whether you are a high-risk borrower and if it’s a smart idea to loan you a huge amount of money. It also determines the interest rate you’ll receive from the lender, so it is worth your time to work on increasing your score.
------------------------------
RELATED VIDEOS:
Learn How to Meet FHA Requirements
A Few Tips About Your Fixed Rate Mortgage
Your Proof of Ownership Is the Property Title
FHA Loan Articles
February 17, 2025The federal government backs FHA home loans, which allows participating FHA lenders to offer lower down payment options and more lenient credit requirements. How much do you really know about your FHA home loan options and how they compare to other mortgage choices?
February 13, 2025For many college graduates, student loan debt is a concern. A common question is how this debt impacts the ability to buy a home. This Q&A explores the relationship between student loans and FHA loan approvals. How much do you know about how your student loan debt affects your ability to be approved for a mortgage?
February 12, 2025Choosing between FHA and conventional home loans can be daunting for some first-time home buyers. What are the concerns between these two programs, and what does each one offer the borrower? We examine some of the key issues in our question-and-answer session about FHA mortgages versus conventional loans.
February 11, 2025Established in 1934 as part of the National Housing Act, the FHA's primary mission is to stimulate the housing market by providing mortgage insurance to lenders. This insurance reduces the risk associated with lending to borrowers who may otherwise be considered higher risk, encouraging lenders to offer more favorable terms, such as lower down payments and more flexible credit requirements. A key element of the FHA program is its commitment to fair housing, which is deeply rooted in the Fair Housing Act.
February 10, 2025How much do you really know about the home buying process? One major factor in protecting your new investment is knowing how the title search process works and why you need to have one done. This quiz will assess your comprehension of what a title search entails, why it's so important when using an FHA loan, and how it protects you as a buyer. From identifying potential liens to guaranteeing clear ownership, a title search plays a critical role.
