I had always wondered what influences credit scores the most. I had always heard the obvious, paying your bills on time, but there is much more to it than that. How long you have had an account open, how much debt you have, the types of loans and diversity of loans in your portfolio all factor into the all important credit score. I found an interesting article about credit scores that helped clear up these questions, click here. Below are the highlights and if you focus on these factors, you should start to see an improvement in your score soon.
There are several factors that contribute to this score.
Type of Credit: Lenders want to see that you have a history of multiple types of credit. This can include credit cards, installment loans, and mortgages.
Amount of Debt: The more debt you have the riskier you appear to a lender. This means paying down or off debt is a great way to make yourself more desirable for a home loan.
Payment History: You want to be on time with every bill. This includes everything from cable and phone to credit card payments. Late payments may be reported to the credit reporting agencies and will negatively affect your score.
New Credit: Do NOT under any circumstances open new lines of credit, no matter how small, before you start looking for a home. Several new lines of credit will dock your score and may indicate to a lender that you are on a spending spree.
Credit History Length: Younger borrowers are always at a slight disadvantage because they have a shorter credit history. A longer credit history gives lenders a better picture of what kind of borrower you really are.
Be sure to check out your credit report three times a year at annualcreditreport.com. It's free, easy, and secure. You'll have to pay a nominal fee in order to see your score, but checking out your report can help you assess areas that need improvement or areas that have errors which need corrected.
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