Briefly, how your credit score works.

As we continue our conversation about preparing financially to buy or build your new home one of the most talked about pieces of the puzzle is your Credit Score.

Your Credit Score is based on what the Reporting Credit Bureaus calculate whether or not you will repay the loan of money.  There are many factors that contribute to that score, things like:

  1. Timely payments  -  since virtually every “loan” whether it is a credit card, a car loan, student loan, or any time of payment that requires a monthly payment.  The simple question is, “….do you pay your obligations on time?”  The importance of making your payments on-time is very important.  Don’t be late!
  2. Percentage of debt  -  this refers to how much of your line of credit is actually used.  It is not enough to simply make payments on time, you should make a huge effort to make sure you percentage of debt does not exceed 32%.  So if you have a credit card with a $1,000 maximum credit, the actually debt should not go above $320.
  3. Age of your debt  -  a balance that is due for a credit card and is almost brand new will carry less importance than another credit card that you have had for many years.  The older the account the greater the chance it accurately reflects how reliable you are.
  4. Small bills  -  if you have a small monthly bill such as an insurance premium payment it is important that you always pay them on time.  If your monthly bill is $50 (for example) and you are late that create a huge question as to how you will be at paying back several Hundred Thousand Dollars for a mortgage. 
  5. Consistent  -  make a huge effort to pay all your bills consistently and try to not be erratic.  People who are unpredictable tend to look like a scary risk.

All this boils down to making yourself look like a responsible adult taking care of your finances in a responsible manner.

We would love to hear your thoughts.  Call us at (802) 985-5855

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