When it comes to your credit score nobody knows the exact algorithm the reporting agencies use to determine your beacon score. However, we've got a pretty good idea of which areas are the most important. I have broken them. The 5 factors are:
- Payment History
- Current Debts
- Age Of Accounts
- Type Of Credit
- Credit Enquiries
Payment History - 35%- This is the most important category. Factors which affect your score include the number of payments over 30 days late, and how recently they happened. Collections, judgments, and bankruptcies fall into this category. A single 30-day late payment can drop your score 15-20 points.
Age of Accounts - 15% - The longer your accounts have been opened the better. The lender views credit as character so the more history they have the better. For mortgage purposes you usually need 2 accounts open for at least two years.
Type of Credit - 10% - Bank loans, credit cards, and revolving credit accounts all impact you differently.
Credit Enquiries - 10% - Numerous credit applications in the past 12 months is a no-no. That's another reason why you want to work with a mortgage broker like myself. I run one credit application and have the potential to go to dozens of lenders on your behalf. If you shop around going from bank to bank each bank will individually pull your report from the credit bureau.
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