Learning and Managing Credit Score Calculation Factors
No matter what mortgage area you’re looking into, credit score is going to be a huge factor no matter what. It’s one of the single largest factors in getting you the best mortgage rate, and also in which kinds of advantageous mortgages you’ll be eligible for.
At Altius Mortgage and our partners at Mortgage Ogden, we’ll help you get the best possible rate and mortgage given your credit score and other factors. Here are the main factors that go into determining your credit score, and how you can impact them.
Payment Timing
Credit bureaus care a lot about on-time payments, and they track the percentage of time bill payments are made on time compared with how often they’re late. This factor carries a heavy weight within your credit score, so set the proper reminders to make sure you pay all your bills on time each month.
Card Utilization Rate
Having credit is good, but bureaus want to see that you’re actively using it and paying it back as well. This is where card utilization rate comes in. It’s a simple ratio comparing your available credit to your credit currently being used – just divide your open credit balances by your total open limit. Credit bureaus want to see regular activity, and a willingness to use open credit.
Derogatory Marks
Things like bankruptcies, collections, foreclosures and liens all will count heavily against your credit score. Some of these can take up to a decade to clear from your credit score, and they’re big red flags for many lenders. Avoid these situations at all costs.
Average Age and Number of Active Accounts
Average age is simply a broad average of the lifespan of all open credit avenues, including credit cards, mortgages, and other forms of loans. Bureaus want to see a long history, suggesting that you’ve successfully managed your debt over time. As an example, something you never want to do near a time when your credit may be checked is close an old credit card – this will decrease the average length of your open credit lines, and lower your score.
Down similar lines, the number of active accounts open makes a difference. If you hold several open accounts and are making the proper payments on all of them, this will make lenders more confident. This is one of the smaller overall factors, though, so don’t start opening a bunch of new accounts just to raise score here.
For more information on the way credit bureaus calculate credit score, or on any of our mortgage company services, speak to the brokers at Altius Mortgage or Mortgage Ogden.
