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Home-buyers seeking the best rates for their mortgage—remember to check your credit score and review your credit report. The best loans and rates that you need to own your dream home may depend on it. Understand that these two things play a vital role in the entire home buying process. These days, lenders and creditors have increased their vigilance in terms of determining your interest rates to avoid lending risks. And their most important basis for this is a person’s credit score and credit report. Calculation of credit scores Credit grades are generated after pulling the data of an individual from the credit report. The information is fed into the software that analyzes it andproduces the number, which then becomes your grade. The three major credit reporting agencies providing free credit reports; Experian, Transunion and Equifaxnot necessarily same scoring software, so there is no need to worry if your scores from the three institutions vary a bit. The differences in their computing algorithms are the cause of this. Glaring differences however should be looked into. In case, your grade is not up to acceptable standards, then you should start working on how you can qualify for good interest rates on a home loan. Hence, it is vital to understand the elements that define your grade and how you can clean up your credit report. • Your payment history has 35 percent contribution in grade calculation. The way you have shown responsibility towards payments in the past is reflected in the score. Your payment history includes accounts which have been paid, and negative accounts that went in public records or went in collection.In addition, all your delinquent accounts are also looked at while calculating the score. • The amount you owe has the second largest place in your grade. The number of owed accounts, types of accounts with balances, number of revolving credit lines and accounts with zero balances collectively form 30 percent of the grades. • 15 percent of credit score is formed by length of your credit history. It includes total length of time tracked by credit report and time since accounts were opened. • 10 percent is contributed by the types of credit used by an individual, which include total number of accounts of installment, revolving, mortgage etc. • The last 10 percent is accounted by the number of recently opened accounts and the proportion of new accounts along with recent enquiries. If you have a credit score over 700, then you will be offered more financing options and better interest rates. Do not worry. If your scores are lower rather try to recover the irresponsibility towards the credit you have shown in the past. Also, remember there is availability of mortgage product for nearly everyone. Get free credit report and free credit score now and check your credit history before making any big financial decision.
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