Posted on 06/09/2016 10:03:29 PM PDT by Graybeard58
No number is more important to prospective home buyers than their credit score. Put simply, these three digits are a numerical representation of your track record paying off your debts, from credit cards to college loans. If you’ve applied for a mortgage to buy a home, lenders check your credit score. If it’s high, getting a mortgage will be a breeze; if it’s low, you may struggle.
So now that we’ve got your attention, the question remains: Exactly what is a good credit score?
Here’s the deal: A perfect credit score is 850. But all scores 760 and above are considered to be in the best credit score range. Since this means you’ve shown an excellent ability to pay off your past debts, mortgage lenders want your business—and will try to entice you by offering loans with the lowest interest rates, says Richard Redmond, mortgage broker at All California Mortgage in Larkspur and author of “Mortgages: The Insider’s Guide.”
A good score is from 700 to 759; a fair score is from 650 to 699. Since a lower score means you’ve had some late payments or other dings on your credit history, lenders see you as more likely to default on your home loan. They may still give you a mortgage, but at a higher interest rate, says Bill Hardekopf, a credit expert at LowCards.com.
Credit scores below 650 are deemed poor, meaning your credit history has had some rough patches. This doesn’t necessarily mean you can’t qualify for a loan, but it may be tough, and you’ll pay a higher interest rate for the privilege.
How credit scores are calculated
Three major U.S. credit bureaus track and tally your scores: Experian, Equifax, and TransUnion. Their scores should be roughly similar, although each pulls from slightly different sources (Experian looks at rent payments while TransUnion checks out your employment history). But by and large, here are the main variables that determine your score, and to what degree: •Payment history (35%): This is whether you’ve made debt payments on time. If you’ve never missed a payment, a 30-day delinquency can cause as much as a 90- to 110-point drop in your score.
•Debt-to-credit utilization (30%): This is how much debt you’ve accumulated on your credit card accounts, divided by the credit limit on the sum of your accounts. Ratios above 30% work against you. So if you have a total credit limit of $5,000, you will want to be in debt no more than $1,500 when you apply for a mortgage.
•Length of credit history (15%): It’s beneficial to have a track record of being a responsible credit user. A longer credit history boosts your score. CreditKarma.com, a credit-monitoring service, found that its members with scores above 750 have an average credit history of 7.5 years.
•Credit mix (10%): Your credit score ticks up if you have a rich combination of different types of credit accounts, such as credit cards, retail store credit cards, installment loans, and a previous mortgage.
•New credit (10%): Research shows that opening several new credit accounts within a short period of time represents greater risk to the mortgage lender, according to myFICO.com, so avoid applying for new credit accounts if you’re about to buy a home. Also, each time you open a new credit account, the average length of your credit history decreases (further hurting your credit score).
How to check your credit score
You can check your own credit report—and should, because it will help you pinpoint areas for improvement. Even if you’re fairly sure you’ve never made a late payment, one in four Americans finds errors on his credit report, according to a 2013 Federal Trade Commission survey.
Errors are common because creditors make mistakes reporting customer slip-ups. For example, although you may have never missed a payment, someone with the same name as you did—and your bank recorded the error on your account by accident.
We paid cash for our house. I am not sure we even have a credit rating.
Strange thing is, they badger you to obtain their cards.
Then they badger you to use them.
Then they get upset when you have them and use them.
Who scores these banks who give you 0.0000001% interest on your savings, and then charge you 12.5 to 29.9% interest on what they loan you?
I had one credit card company call me all concerned because I had a high balance under my credit limit.
I start getting letters telling me I have a new monthly payment due in 20 days. By the time I’m down to five or four days, they’re in complete panic mode.
I pay my bills 36 to 24 hours before they are due.
My spreadsheet financial planner has due dates on it, and I only beat them by a few days. Why should I give them float time on my money?
We have 3 Credit cards, a mortgage and a line of credit but our bank doesn’t report so our’s changes according to how much we charge on the CCs every month but it stays in the 800s.
Probably low. My son did the same thing. No credit card and no mortgage, which are the two most important. He did pay off a student loan years ago, which doesn’t seem to matter much in the credit score game.
>>>but our bank doesn’t report so our’s changes according to how much we charge on the CCs every month but it stays in the 800s.
If it changes according to how much you charge, then it’s likely that your bank reports.
Problem is they report when the bill is sent - when your balance is highest.
It’s the balance to limit ratio that matters - dollar amounts don’t. Your score will be highest if you pay the card down and wait 30 days - so the balance reported is still low.
If someone was preparing for a major purchase and wanted their score to be as high as possible, this would be the basic strategy as far as credit cards.
I know it doesn’t report, some months we just spend a lot on business expenses so it changes for the percentage of our available credit that we use. We live in a small town and don’t have access to a lot of things and have to use the internet. We do pay in full every month though.
When someone lists their EBT card as a source of income, they may not qualify for a loan.
My wife asked what ours was and I told her I hadn’t checked but it might as well be 850. We’re retired, own everything we have and can pay directly for anything we want/need - with no reason for a loan.
If you have any CapitalOne accounts, pay those at least five days ahead of time, ten if you are mailing in a check. In my experience, CapitalOne is a sleazy company that stalls when it clears payments to hit people with late fees and trigger higher interest rates.
I once had an account (not Capital One) that didn’t give me much time to pay the bill. I used to walk the payment right to the post office as soon as the bill came in to avoid as many delays as possible so it wouldn’t be late. I called them about it and got obnoxious talk-arounds. Couldn’t pay that one off soon enough and close it.
Bankers are scum. Even Jesus didn’t want them in His temple.
When someone lists their EBT card as a source of income, they may not qualify for a loan.
...
I’m surprised Obama hasn’t issued an EO saying that they do.
I have a lousy credit rating. I buy everything cash.
“but it might as well be 850.”
In your situation it would not matter if it were 850 or zero!
We use two credit cards; pay the balance monthly (no finance charges). We have a mortgage, have never missed a payment. No car loans, no loans of any kind.
Credit score is 745.
To improve this score, I guess I would have to borrow money like there’s no tomorrow and pay partial balances (and pay interest).
This would increase my credit score?
No, thank you.
A “deadbeat” is the unflattering term sometimes used in the credit card industry to describe consumers who pay off their balances every month, using the lenders’ money but paying no interest on it. The more-polite, official term is “transactor.” Since the recession’s end, deadbeats — or transactors — have been on the rise, since more consumers see the wisdom of using credit cards as a tool of convenience, not an instrument of debt.
Read more: http://www.creditcards.com/glossary/term-deadbeat.php#ixzz4BB2gwccf
Follow us: @CreditCardsCom on Twitter | CreditCards.com on Facebook
Compare credit cards here - CreditCards.com
That's what I told the wife - I really don't care what the score is - if I ever desire a loan (the last one I took was because it was zero interest for a period of time so I decided to go that route instead of buying the car outright) I have the luxury of twisting arms for the best rate or going elsewhere - when they know it's only a convenience instead of a necessity, it gives you a bit of leverage.
I agree and follow that course nearly.
Except...... I am both busy and old. I might just forget on the last night and not make the payment.
To forestall that action, I make an automatic regular payment early in the month to cover the minimum just in case I somehow do not pay the balance as intended.
Thus, there is no late charge by the bank or against the credit score.
I don’t think my score matters any more.
Retired. All I need is owned outright. Pay cash for everything. No debt. Could care less about credit rating.
God has been good to me.
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