Today's KCM Blog Post: "The 5 Components of a Good Credit Score"
We are bombarded constantly about how important our credit score is. What do we actually need to know? We asked our ‘resident expert’, Dean Hartman, to shed some light on the matter. – The KCM Crew
Everyone knows that you need a good credit score to get a mortgage. Most even know that your score will affect the rate and fees you pay for your loan; but few are aware that your credit score also is a determinant of your homeowners’ and auto insurance rates and a myriad of other things.
Simply put, your FICO Score has a huge impact on your financial life. So, how can we get the best possible score?
There are five components to your score:
1. Your Credit History makes up 35% of your score.
This is obvious. How you have paid your responsibilities before is a good predictor of how you will pay them in the future. While your credit profile will look back seven years, the most weight is given to your activity and performance over the last 24 months. Here’s a little known tip about your credit. Let’s say, you have a “charge off” for a cell phone bill you didn’t pay 5 years ago. Today, that “charge off” has little impact on your score. Many people, as they prepare to buy a home, will just pay the “charge off” to clean up their credit report. Makes sense, doesn’t it? However, by doing this, you will move the activity on the “charge off” to now (which is in the two year window), actually lowering your score. Before you do anything like this, talk to your mortgage professional!
**Do you have questions about your credit score? Ask Kevin for his list of preferred mortgage advisors.
