WHAT TO KNOW About Credit Scores

“Expect the best. Prepare for the worst. Capitalize on what comes.” Zig Ziglar

Credit scores range between 200 and 850, with scores above 620 considered desirable for obtaining a mortgage. The following factors affect your score:

Your payment history. Did you pay your credit card bills on time? Bankruptcy filing, liens, and collection activity also affect your history.

How much you owe and where. If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, spreading debt among several accounts can help you avoid approaching the maximum on any individual credit line.

The length of your credit history. In general, the longer an account has been open, the better.

How much new credit you have. New credit—whether in the form of installment plans or new credit cards—is considered more risky, even if you pay down the debt promptly.

The types of credit you use. Generally, it’s desirable to have more than one type of credit—such as installment loans, credit cards, and a mortgage.

Credit scores play a big role in determining whether you’ll qualify for a loan and what your loan terms will be. So, keep your credit score high by doing the following:

Pay down credit card bills. If possible, pay off the entire balance every month. Transferring credit card debt from one card to another could lower your score.

Don’t charge your credit cards to the max. Pay down as much as you can every month.

Wait 12 months after credit difficulties to apply for a mortgage. You’re penalized less severely for problems after a year.

Don’t order items for your new home on credit. Wait until after your home loan is approved to charge appliances and furniture, as that will add to your debt.

Don’t open new credit card accounts. If you’re applying for a mortgage, having too much available credit can lower your score.

Shop for mortgage rates all at once. Having too many credit applications can lower your score. However, multiple inquiries about your credit score from the same type of lender are counted as one if submitted over a short period of time.

Avoid finance companies. Even if you pay off their loan on time, the interest is high and it may be considered a sign of poor credit management.