Credit is an important factor when it comes to buying a home.  Mortgage companies run a tri-merge report pulling information from Experian, Equifax, and TransUnion.  A mortgage credit report uses a different algorithm than say, a car loan credit report.  So what is a good credit score?  Let’s see first what makes up your credit score.

Credit Score Makeup

 

Credit history: Make your payments on time, even if you are making the minimum payments.  A missed or late payment can lower your score by 80 to 120 points.

Credit utilization: Keep your balances low, generally between 20-25% of the high credit.  Lenders calculate your debt to income ratio by comparing your spending habits (monthly obligations) to your earnings.

Length of credit history: Keep those credit cards you have had the longest open, whether you are using them or not.  Once the account is closed, the history is lost.

Credit mix:  Have multiple types of credit such a revolving accounts (credit cards), mortgages, installment loans (vehicles), etc.

Applying for new credit:  A lot of new credit in a short period of time looks like you are desperate for credit and potentially a higher risk.

To ensure the best terms for your loan, a credit score of 740 or better is ideal; however, the minimum score for all loan programs is lower. 

So, what steps can you take to improve your score?

  • Shop for rates for a specific loan within a short period of time

  • Pay your bills on time, even if it is just the minimum payment

  • Pay off debt rather than moving it around

  • Review your credit annually with the three bureaus

  • Do not close accounts as a strategy to raise your score; it often does not help

  • Monitor joint and co-signed accounts

  • Apply and open new accounts only as needed

  • Keep balances low on revolving accounts and credit cards

*Note: American Pacific Mortgage Corporation is not a credit repair company; this information is for information purposes only. We are not licensed credit repair specialists or counselors. 

 

Wait times before you can finance a property

If you've experienced a credit event - such as a foreclosure, bankruptcy, or short sale - you may be able to finance a home purchase sooner than expected. Here are some general waiting period guidelines for common situations:

* Written permission from the bankruptcy court/trustee is required.

** 12 months payments and bankruptcy court approval may be required

 
 

Need to know more?

Call us at (626) 653-1800 or click below to send us an email!