Home Buying & Your Credit

You’ve decided to buy a home…Congratulations! Buying a home is one of the best and biggest investment decisions you may ever make. Now you need to understand your Credit Score. Your Credit Score, along with other factors, will determine what kind of loan, if any, you will be able to get to purchase a home. To get started, you first have to know and understand your credit score.

Understand Your Credit Score

Several factors go into creating a credit score. This is a mathematically based calculation of various factors in your credit report. There are many factors that go into determining your credit score:

Payment History

Do you pay your bills on time or have you been 30, 60, or 90 days late?

Available Credit

What amount of money do you owe and what is the amount of available credit you have?

Length of Credit

Do you have a long credit history or is your credit relatively new?

Credit History

Have you opened new accounts and accumulated significant debt in the last 12-18 months?

Credit Mix

Do you have a good mix of credit including installment credit, such as auto and mortgage loans, with revolving credit such as credit cards?

If your credit score is not exactly what you expected, don’t despair, there are ways for you to improve your credit score. This is not an overnight process but over a 6 to 12 month period you can see significant improvements in your credit score.

What moves your score UP

  • Make payments to pay down your credit cards. The best thing to do is is pay all your balances to half. Then reduce the balance so that your total outstanding balance on your credit card that is about 20% of your total credit limit.
  • Do not close credit cards as you will decrease your capacity
  • Continue to make payments on time (older late pays will become less significant with time)
  • Slow down on opening new accounts

What moves your score DOWN

  • Missing payments – regardless of dollar amounts
  • Credit cards at capacity (i.e. maxing out credit card)
  • Closing credit cards out (this lowers available capacity)
  • Shopping for credit excessively
  • Opening up numerous credit accounts in a short time period
  • Having more revolving loans in relation to installment loans

Are you overwhelmed?

Don’t be! The Mile High Homes Team is very familiar with credit issues and credit scores. Additionally we work with phenomenal lenders that can walk you through the loan process and can help you understand your score so that you get the right loan that meet’s your needs and your financial goals.