It helps to know what a FICO score is and how its determined if you’re thinking about buying a home that number is going to be super important to your future mortgage do you know if a 300 is a good or a bad score how about an 850 do you know how you can approve your score well let’s talk about it right now. If you are thinking of purchasing a house or you’re just in the planning stages please download a copy of my free guide preparing to purchase a home as always I am here to help home buyers and sellers in the San Francisco’s Bay or really anywhere in the US. I can find you an agent that best suits your needs.
Today we are talking about your FICO scores the score is important whether you want it to be or not because 95% of financial institutions use this number and get their scores from FICO. FICO weighs the information in your credit history it is used to determine the factors in your repayment ability according to myFICO.com there are five major factors that weigh into your credit score let’s talk about those number 35 percent of your score is based upon your payment history meaning do you pay your bills on time or are you late number to 30 percent of your score is how much you owe.
Also called your capacity of credit this is based on the amount of credit you have been extended and how much balance you carry on that credit number 3, 15 percent of your score is based on the length of your credit history which credit card or installment plan have you had the longest number for 10 percent of your score is the mix of your credit can be credit cards car loans school loans, etc
number 5 the final 10% of your score is new credit have you opened any new credit cards and if so how many have you opened recently your credit score can be the lowest of 300 to the top and best score of 850.
What’s important to know is that along with a higher credit score comes better interest rates not only for mortgages but also for auto loans student loans and credit cards so now you know how your credit score is made up let’s say that you want to improve it or build your credit score these are the ways that you can do that first of all and the most important let me say it again the most important is PAY YOUR BILLS ON time every month and don’t be late next is pay all of your bills in full each month if possible now if you run into trouble and you need to carry a balance on a credit card make sure it is 30% of your available credit or less.
So here’s my example let’s use a round number for this example you have a credit card that has a $10,000 credit balance I’m sorry credit limit you want to keep your balance at $3,000 or less on that credit card if you have to carry a balance over that $3,000 put the overage on to another credit card.
in essence, you’ll need to carry two credit cards but keep them both under that 30% or under next even when you pay off a credit card keep that credit card open this is going to add life to the scoring of your length of credit history it shows that you are able to manage a credit you were able to pay your credit and you’re showing it over a long length of time next avoid all the negatives to your credit this is going to be bankruptcy foreclosure repossession of cars short sales on home and ugly things like that finally you want to be sure to look at your credit at least once a year you want to be sure there are no inaccuracy or errors on it and if there are you want to go through the process of getting it removed every year you can get a free copy of your credit from annualcreditreport.com
So use it so here are the basics of your FICO score and getting a mortgage if you have bad credit you’re gonna need to take a step back and work on correcting it starting with the steps that I talked about previously if your credit is really bad you may need to go to a credit repair specialist if your credit is considered fair you can get a mortgage but don’t expect to get the best rates that you hear quoted on TV or the internet those are the rates that they save for the people that have good or great credit these are the people who have established themselves and proven themselves through their credit score to be trustworthy to borrow money.