What You Need to Know About Credit Scores

Your credit score tells lenders how responsible you are with managing and paying back debt. It plays a significant role in the interest rate that you will pay as part of your mortgage.  Specifically, the higher your credit score, the lower your interest rate. A slight difference in interest rates can save you thousands of dollars over the life of your loan.

While there are many different companies that calculate credit scores, FICO is the most popular. FICO scores are based on a scale from 300-850, divided as follows:

Excellent credit: 800+

Very Good Credit: 740-799

Good Credit: 670-739

Fair Credit: 580-669

Poor Credit: 579 or less

According to FICO, your score is determined by the following features of your credit history[1]:

1. Payment history: 35% of your score. Your payment history is how often you pay your bills on time.
2. Credit Usage: 30% of your score. This portion looks at how much of your available credit you use. The ideal amount of credit to use is 30% or less. For example, if you have a total of $10,000 of credit on all your credit cards combined, you should use $3,000 or less per month to maximize your credit score.
3. Length of credit history: 15% of your score. The older your credit history is, the better, with 10 years or more being ideal.
4. Account mix: 10% of your score. This looks at all the types of debt that you have, including credit cards, student loans, car loans and mortgages, to see if you are responsible at paying back different types of debt.
5. Credit inquiries:10% of your score. Whenever a company pulls a credit report on you, that lowers your score. However, when you check your own credit report, that does not impact your score.

If your credit is less than stellar, there is no need to despair. The following tips can help you raise your score:

• Use 30% or less of your credit each month and pay the bill on time.
• Pay all non-credit card bills on time as well, including medical bills, school loans, car loans, utilities, etc.
• If you are unable to obtain a credit card due to a low credit score, obtain a secured credit card. This is when you give the credit card company a certain amount of money in advance and the company uses this amount as your credit limit.
• Resist the urge to sign up for new credit cards when you visit a store and they offer you a discount for signing up for their card. Each time you sign up for a new card, the store pulls a credit report on you, dropping your score.

Like all mortgage lenders, Choice Mortgage Group uses your credit score and credit report to help put together your mortgage. Unlike other lenders though, we are committed to helping people obtain a mortgage even if they lack excellent credit. Contact a Choice Mortgage Group loan originator today to learn how we can help you finance the home of your dreams.

Since 1995, Choice Mortgage Group has been providing homeowners with the best real estate financing programs available. As a licensed lender, we offer a wide variety of services and programs that satisfy the unique needs of each of our clients.

Specializing in residential mortgage lending for over 25 years, our programs include conventional and government lending, purchases, and refinances. We also offer portfolio lending for self-employed borrowers and borrowers with complicated tax situations. South Florida is where Choice Mortgage Group started, and we like to call it home. We are devoted Florida Atlantic University Owls fans and are proud to be the official mortgage lender of FAU Athletics. We also support numerous other local organizations. For more information about Choice Mortgage Group, visit www.choicemortgage.com.

Choice Mortgage Group

2424 N Federal Hwy,

Boca Raton, FL 33431

(561) 395-6900

info@choicemtg.com

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[1]  MyFICO.com.  How are FICO Scores Calculated? | myFICO | myFICO. Accessed May 7, 2022.