Are you ready to purchase a home in California? Last week I talked about how to prepare for your mortgage loan and the dos and don’ts. This week I am going to explain your credit score and how points get added to or subtracted from your score.
Your credit score, also known as FICO Score, is based off of many different factors. The FICO score is issued by the Fair Isaac Corporation and ranges from 300 to 850. According to Anisha at Nerd Wallet the different factors are as follows:
- 35% depends on your payment history.
- 30% depends on your debt-to-debt-utilization ratio.
- 15% depends on how old your accounts are.
- 10% depends on new credit and any efforts made to turn bad credit around.
- 10% depends on the type of credit, such as loans, credit cards, etc.
Credit scores determine how eligible you are for loans and credit cards. If your score is between 300 and 579, it is considered bad credit. This means that you may not be able to get a loan or unsecured credit card, but if you do, there will be higher interest rates and fees attached. If your score is between 580 and 629, it is considered poor credit. If you are in this category, you can get a lower-end unsecured credit card and should start working to raise your score.
A score between 630 and 689 is fair credit and focusing on your debt-to-debt-utilization ratio will help raise it. Good credit is a rating between 690 and 749. At this level you will qualify for loans, credit cards, and other benefits such as low interest rates. The highest-level rating is between 750 and 850 and is considered excellent. At this rating, lenders are happy to provide you with what you need.
Here is a breakdown of different factors affecting your credit.
|Factor||Details||Points Added or Subtracted|
|Years at Current Address||< .5 Year||12|
|.5 – 2.49 Years||10|
|2.5 – 6.49 Years||15|
|6.5 – 10.49 years||19|
|> 10.49 Years||23|
|Years at Job||< .5 Year||2|
|.5 – 1.49 Years||8|
|1.5 – 2.49 Years||19|
|2.5 – 5.49||25|
|5.5 – 12.49 Years||30|
|> 12.5 Years||39|
|Department Store/ Major Credit Cards||None||0|
|Major Credit Card||16|
|Debt Ratios||< 15%||22|
|15 – 25%||15|
|26 – 35%||12|
|36 – 49 %||5|
|Number of Inquiries||0||3|
|3 – 4||-7|
|5 – 9||-20|
|Years in File||< 1 Year||0|
|1 – 2 years||5|
|3 – 4 years||15|
|5 – 7 Years||30|
|> 8 Years||40|
|Number of Revolving Lines of Credit||0||5|
|1 – 2||12|
|3 – 5||8|
|Percentage of Balances Available||0 – 15%||15|
|16 – 30%||5|
|31 – 40%||-3|
|41 – 50%||-10|
|Derogatory Credit||Any Derogatory Credit||-29|
|Any Slow Payment||-14|
|1 Satisfactory Line of Credit||17|
|2 Satisfactory Lines of Credit||24|
|3 Satisfactory Lines of Credit||29|
Chart retrieved from Financial Education Services at http://www.fesexperts.com.
When you are ready to purchase a home, we at Haylen Group are here to help you with all of your real estate needs! If you are unsure what your options are, call Helen Chong at (408) 800-LIST or email at Helen@HaylenGroup.com. You can also visit us at our website for available listings and additional information.