With so much talk about credit crunches and lenders tightening their belts, knowing where you stand can give the edge in obtaining a mortgage, or fixing a problem before you apply for credit.
Your credit score determines not only whether you will get credit, but can also influence your rate or whether you need to get a guarantor.
Credit scores range between 200 and 800. The higher your score, the more choice you will have with mortgage options and lenders. These factors will affect your score.
- Your payment history. Whether you paid credit card obligations on time.
- How much you owe. Owing a great deal of money on numerous accounts can indicate that you are overextended.
- The length of your credit history. In general, the longer the better.
- How much new credit you have. New credit, either installment
payments or new credit cards, are considered more risky, even if you pay promptly.
- The types of credit you use. Generally, it’s desirable to have more than one type of credit—installment loans, credit cards, and a mortgage, for example.