Tuesday, April 9, 2013

How Your Credit Score is Calculated

How Your Credit Score is Calculated






If you’ve been looking into Louisville Kentucky mortgage rates in order to buy a home, then I’m sure you’re aware of how big a role credit plays into the homeownership process. It’s a major indicator when it comes to whether or not you are approved, and what kind of terms will be offered.
How is your credit taken into account in these circumstances?
First, your credit score tells your lender how much of a risk it will be to loan you money for a home. So this means if you have excellent credit, the likelihood of getting a loan approval is very high. However if your credit is poor, that means it increases the risk of the lender and you may find yourself with higher rates and stricter terms.
Your credit score (FICO) is based on the following five points: (listed in order of importance)
  1. Payment History
  2. Amounts Owed
  3. Length of credit history
  4. New credit
  5. Types of credit used
If you’d like more detailed information about credit scoring, try reading this: What’s in Your FICO Score.

You can get your credit score on your own, without having to go through a lender first. The site offers a free report and will give you an idea as to how much of a risk you present. WWW.annualcreditreport.com 




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