Understanding credit a little better

Understanding your credit a little better!

Just some basic information:

1. Credit scores are built as follows:

35% is based on your payment history (How well you have done in paying your bills on time, etc.)

2. 30% Amount of Debt

3. 15% Length of credit

4. 10% New inquiries (Usually done within several days of each other.)

5. 10% Mix of credit (Between Revolving/Installment) More weight is put on your revolving because based on your credit line it can go up very quickly. Keeping your revolving balance at or below 30% of your credit line strongly effects your credit score in a positive way..

Besides your credit score here are some of the things that can effect your credit negatively when buying a home:

1. Paying off accounts and/or closing accounts. This may cause you to have a 0 credit score and can take up to 6-12 months to repair it.

2. Paying off old credit that is not currently being shown as a collection/charge off. Once you agree and pay it off it could end up showing up again on your credit report and lower your score.

3. Being late on payments (Many people think that if they don't receive a bill they don't need to make that payment until they do receive one. Not true, most companies will consider you late if not payed by the the delinquent dated stated in their terms of lending. (They may report that as a late payment or slow payment based on the length of it being late.)

Things that hurt your credit, ability to purchase a new home, etc:

1. Judgments and Liens (Usually stay on your credit report until they are paid off. You usually can't sell a home or get a mortgage for a new home until those are paid off.)

2. On government liens (taxes, student loans, etc.) you usually can't get a government loan to purchase/refinance a home until they are paid off

3. Auto collections can hurt you you harder than some.

4. If you are cleaning up your credit anytime you make agreement to pay something off or settle a debit get that agreement in writing from the company first and then ask for a letter in writing saying it has been paid off. This is very important so you have something to back you up if they delay in reporting it.

This is just general information and may differ from state to state, lender to lender, etc. Anytime your credit is in question you should call a lender or credit repair person to get the correct answers based on your individual situation. I am not a lender or a credit repair person, so please verify this information before assuming it applies to you. If you are purchasing a home always check with your lender before making any changes to your credit.