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What Does My Credit Score Actually Mean?

If you have ever applied for a credit card, you probably know that your likelihood of getting the credit card depends on any past experiences with the company and your credit score. Your credit score can determine your eligibility for credit card offers and what their credit limits would be, and can affect whether you are approved or denied for a home loan or car loan. It can even affect the rates that you pay! A person with a high credit score will undoubtedly pay less in interest on any loan than someone with a poor credit score.

What is a credit score, exactly? It is important to note that there are different credit scores by different companies:

Credit Score

This is the most widely used credit score model in the United States, and this is usually the credit score that lenders will refer to when they assess your eligibility for a loan or credit card.

A Credit Score can range from 300 to 850.

VantageScore

This credit score model was introduced by the three major credit bureaus: Equifax, Experian, and TransUnion

A VantageScore Credit Score can range from 501 to 990.

How Is My Credit Score Calculated?

The Credit Score is calculated based on a number of different factors. A brief breakdown of the score is included below:

10% of your score consists of recent credit inquiries. If you apply for a new credit card and you are denied, this can affect your credit score.

10% of your score is based on the types of credit that you have managed. For example, being able to consistently pay and manage installment accounts, credit card accounts, and a mortgage will reflect positively on your score.

15% of your score is based on the length of your credit history. If you have only recently obtained your first credit card, it will take some time before your credit score will improve.

30% of your score is based on how you utilize your credit. This portion of your score involves a ratio of your current balances across all of your credit accounts compared to the maximum total allowed credit from those credit accounts.

35% of your score is based on payment history. If you pay your bills and accounts in a timely manner, then this will be reflected positively on your account.

Does Your Score Put You in a Good Buying Position?

A very common question when preparing to buy a home is “What is the minimum credit score to get a mortgage?” The answer is generally, “it depends”.

Conventional loans typically have the highest qualification guidelines with minimum scores of at least 640.

FHA loans have a couple of tiers related to the minimum qualifying credit score. Borrowers with a credit score of at least 580 can qualify for a loan with as little as a 3.5% down payment. Borrowers with credit scores between 500 and580 can also qualify for a loan, but will be required to produce a down payment of at least 10%.

Subprime lenders and hard-money lenders can write mortgages for borrowers with credit scores down to 580, but the interest rates associated with these loans can be very high.

If you have a credit score that is lower than the minimums shown here, then it’s usually valuable to spend some time understanding what’s bringing down your score. Bad credit can be repaired using legal dispute techniques, and simple things like reorganizing your debt can have a significant impact on your credit score.

The team at My Financial Gateway specializes in helping bad credit buyers get approved. We can help you get your credit scores, understand which loan programs might be best for you, and even refer you to a credit-repair agency. Simply complete the form above. We’ll help you find the answers you need.

Average credit scores have fallen over the past 10 years.

To stay competitive, mortgage lenders have continued to develop programs for borrowers who are seeking bad credit mortgages.

Though there are multiple types of bad credit mortgages, the most common ones are conventional loans and FHA loans. Conventional bad credit mortgages typically accept borrowers with credit scores down to 640 and require a 20% down payment. FHA bad credit mortgages can accept borrowers with credit scores as low as the 500s, and typically have lower down payment requirements (between 3.5% and 10%).

These programs allow bad credit buyers to get approved for a mortgage, but frequently at a higher cost. Before getting started on applying for a mortgage, it’s recommended that you become familiar with your current credit profile. Once you know where you stand, our team can assist you with determining the program that’s best for you.

The mortgage application process can be quite time consuming, and it’s possible to improve your credit scores during the time it takes for the process. You might be able to negotiate a better rate at closing if you do.

The team at My Financial Gateway can help get you your credit scores, understand your options between FHA and conventional loans, and even refer you to credit specialists to help improve your scores. Simply complete the form above, and we’ll help you find the answers you need.

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