Are you thinking about refinancing your mortgage? If so, there are several reasons why refinancing…
What Affects Your Credit Score?
Your credit score is a factor used to determine your eligibility for car loans, credit cards, and even your mortgage, which is why understanding what causes your score to go up or down is important. Credit scores are composed of different factors that have varying degrees of importance. Here are a few of the main factors that can affect your FICO® Credit scores:
- Payment History: Do you pay all of your accounts on time? One or two late payments isn’t a big deal, but repeat late or missing your payments can be detrimental to your credit score. Accounts that show no late payment will increase your FICO® scores. According to FICO®, payment history affects 35% of your overall credit score.
- Public Records and Collections: Public records and collections are a factor when looking at your payment history. If you declare bankruptcy, it will stay on your score for 7-10 years, dependent on the type of bankruptcy filed. Foreclosures, lawsuits, wage attachments, and liens also negatively affect your score.
- Length of credit history: Length of your credit history is another factor of your payment history. A longer credit history is better for your credit score as long as your are making your payments.
- New Credit: New credit accounts can impact your credit score. Did you sign up for 5 credit cards in a week? This could have a negative impact on your credit score. New credit affects 10% of your credit score.
- Credit Inquiries. When applying for new credit, a company will do a hard pull of your credit. These inquiries will stay on your FICO® credit report for two years. Some credit inquiries will be ignored, and pulls for an auto loan or a mortgage will often appear as a single inquiry if they are pulled in a short time frame, so you can shop for your rates.
- Type of Credit Used: Do you have experience with multiple lines of credit? Variety is good for your credit score. For example, do you have an auto loan and a credit card you’ve been paying regularly? This would positively influence your credit score. According to FICO®, this affects 10% of your overall score.
Things that DON’T affect your credit score:
- Age, race, income, job title, marital status
- Child support/Family obligations
- Soft credit inquiries (for example, pre-qualification for a credit card)
- Your participation in credit counseling
- Interest rates on credit cards or other accounts
Interested in learning more about how much you qualify for? Reach out to one of our HUNT Mortgage team members today!