Understanding Credit Scoring - Information From American Financial Resources

Your credit score is an important part of your application for a mortgage or any other source of credit such as a home equity line, car loan, boat or motorcycle loan, line of credit, or credit card. Maintaining a good credit score will help you receive the best pricing when you borrow money. Even when not in need of additional credit you may be asked for permission to pull your credit report when applying for a job, renting office space, opening a cell phone account, or opening an account with a utility company. The reason for this focus on credit history is that how one has paid their bills in the past is a good indicator of how they will pay them in the future and how fiscally responsible that person is.

What Affects Your Credit Score

The companies you have credit accounts with report information on your spending, credit use, and repayment to the three credit bureaus. These bureaus: Equifax, Trans Union, and Experian, compile and analyze the data along with additional information using a complicated formula to come up with a number - your credit score. The higher the number on a scale of around 300 to 900, the better your credit is deemed to be. If you have excellent credit lenders will feel it is less risky to lend you money. If you have low credit lenders will be more wary about approving your loan application.

Many things go into the formula used to calculate a credit score. Among them are:

• Whether payments were made on time. If they were made late how often, and how late.
• The percentage of available credit in use.
• The amount of available credit.
• The length of time credit accounts have been established.
• Collections, liens, and bankruptcy filings.
• Inquiries, or requests to view your credit report.

Will You Qualify For A Mortgage?

Many potential home buyers or homeowners hoping to refinance are anxious that they might not qualify for the best mortgage rates due to imperfect credit. The best way to find out where you stand is to review your credit report with a loan consultant. You may be pre-approved for a mortgage in minutes! Understanding what is on your credit report will also allow you to correct any mistake that may be present. Call 800-316-9508 to speak with someone from American Financial Resources. You can also submit a rate quote request or get started online and we will get back to you with information at your convenience.