This is the first post in a blog series on what your bank will look for in their credit score analysis when you apply for a home loan.
Credit reports. They can determine whether or not you are granted a loan, mortgage or credit card. It's a good idea to get to know your credit rating and what, exactly, is on your credit report. It can be frustrating when you always pay your bills on time without missing payments, yet still get declined for a line of credit.
What is it that lenders look for in their credit score analysis? While there are no hard and fast standards that determine whether a lender will accept approve you for a home loan, there are some things that can significantly raise or lower your odds of getting that line of credit you applied for.
A Lender's Credit Score Analysis Beings With the FICO Score
It’s important to look first at FICO scoring. FICO scores are calculated by looking at various different parts of your credit information that is found in your credit report. There is both positive and negative data recorded in your report and different aspects will either raise or lower your credit score. Your data is separated into 5 categories:
- Payment history, which account for about 35%
- Any outstanding debt, which accounts for 30%
- Length of your credit history, accounting for 15%
- Types of credit you have, accounting for 10%
- New credit accounts, accounting for 10%
FICO scores run from 300 to 850, with a higher score showing that you are a lower risk and a lower score making you a higher risk.
Are you in the process of improving your credit as you get ready to buy a home? Call me at 703-462-0700 or email me at DarrenRobertsonHomes@gmail.com so I can refer you to some great “no pressure” lenders who will be happy to give you some in-depth strategies on improving your credit. They are great about answering your home loan questions regardless of whether or not you end up using their services.