If you are financing the purchase of your home, or re-financing your current home, you will quickly come to realize the importance of your credit score. This is when you ask yourself what can you do to improve your score.
Scores
You may think you know your credit score because you get a score with/through your credit card(s). The first thing to understand is that you are only seeing one score. The fact is that there are 3 main credit bureaus and they each offer a score for you. Their score depends on what is reported to them. So if you financed a purchase and that creditor is not reporting to the bureaus, then your credit is un-affected.
FICO vs the competition
While many people use FICO score and credit score interchangeably, the fact is that FICO is only one way to arrive at a credit score. FICO has been around the longest. More recently, there’s a push by the competition to bump FICO from its standing as the top choice of creditors everywhere. Some creditors are using Vantage. Others are using even less well know providers. This means that the score you see on your statement is not necessarily what the mortgage lender uses to qualify you.
Lenders
Involve your lender early in the decision to buy/re-finance a home. A decent lender will happily work with you to determine your credit score that is used to get a mortgage. They can run your credit, with your permission. If they see a low score, they can run a simulation to determine the effect of paying off one or more loans or reducing the balance on them. This step will help you avoid needless payments that do little or nothing to improve your score. In some cases, paying off an old debt may actually lower your score.
For more tips on credit scores go to this video starting at the 4:10 mark until about the 7:00 mark. The video has many other helpful tips. You can also discuss how to improve your score by calling me directly at 760 622 5087 or writing to me at [email protected]
Photo by NeONBRAND on Unsplash
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