Your credit score has a huge impact on the loan type you qualify for and your interest rate which impacts your monthly payment and how much you can qualify for. With all the CREDIT KARMA and commercialization of credit understanding most people think they know their score, but the mortgage industry doesn’t use the score you see when you get it from your credit card or credit monitoring system. My clients are frequently disappointed to find out that their mortgage score is much lower than what they thought their score was.
You can find out your mortgage score by having a mortgage loan officer run your credit or by paying an upgraded membership to your credit monitoring that will then show you the different scores used by auto lenders, mortgage companies etc. Mortgage companies use the FICO 8 model and we run all three bureaus. The score used to determine your qualification is the middle of the 3 bureaus.
Keeping your balances below 30% of the high credit allowed on your credit cards is very important.
Never make payments 30 days late and try to avoid collection accounts. Paying off past due old debt can many times lower your score. The best way to improve your score is to have 3-5 open accounts that you are minimally using and paying on time. If you have bad credit or no credit the best way to establish credit is by going to a credit union and getting a secured credit card and a secured loan. You give the bank $500.00 and they put it in a savings account and then they let you borrower your own money and pay yourself back and they report it to the credit bureaus and it increases your credit score.
BE CAREFUL WITH YOUR STUDENT LOANS- if you have student loans in deferment, they sometimes come out of deferment without you knowing and then they start reflecting as 30 days late on your credit report. To make matters worse even though you may only make one payment the student loans are broken down into many accounts and so all the accounts reflect late payments which has a negative impact on your credit score, it looks like you paid 10 accounts late when really it was only one account.