Spurr Mortgage

233 E. 10th Street Plaza

Suite 3

Edmond, OK 73034

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(405) 348-9919 (405) 348-6717233 E. 10th Street Plz. Suite 3, Edmond, Ok 73034

Your Credit Score

creditscore

What is a credit score?

Your credit score is a number based on a statistical analysis of your credit files, that in theory represents your creditworthiness or to put it bluntly do you pay your bills on time. A credit score is primarily based on your credit report from one of the three major credit bureaus: Experian, TransUnion, and Equifax. Income is not used when calculating your credit score.

Though there are different methods of calculating credit scores, FICO is the most widely used. Many mortgage lenders use a risk-based system to determine the possibility that you may default on your financial obligations. Some lenders may choose to use just one of your credit reports, but it is commonly practiced to a take an average of all 3. The higher your credit score, the better off you are to get a better loan.

How does my credit score affect my ability to get a mortgage?

Borrowers with high FICO scores in-between 760 and 850 can expect lower interest rates and more loan options.  Borrowers with scores of 620 or lower usually are usually placed in the “subprime” category and can expect higher interest rates and few loan options. A FICO score of about 500-520 is generally the minimum that will qualify for a mortgage.

Please keep in mind that while scores are important, they are not the only thing lenders take into consideration when approving a mortgage and low scores aren’t insurmountable obstacles. Other “offsetting factors” can balance a low credit score, such as a large down payment, large cash reserves or an overall low debt-to-income ratio.

How can I improve my credit score?

First off, ensure your credit score is accurate. Obtain a copy from all three bureaus and scrutinize each entry. If there is an error, be sure to report it to the bureau and contact the company that is reporting the inaccuracy.

Second, start paying down your debt. Even if you are making your payments on time, your balance on credit cards or loans that are close to max can be hurting your score.

What not to do!

Do not close accounts. Closing accounts does not improve your score and in some case will cause further harm to your credit score.  If you’ve closed one or two credit accounts, but not reduced your overall borrowing, you’ve boosted your ratio of indebtedness compared to the total amount of credit available. Lenders prefer to see that you have lots of credit available, but relatively little of it actually borrowed.