Uncategorized June 10, 2024

A Lenders Perspective on Credit Scores

Have you ever wondered what a lenders perspective is on credit scores? Well the wait is over. Lender, Michelle Schmidt from Movement Mortgage goes the extra mile sharing not only how a credit score is viewed by lenders, but also provides a breakdown of five main factors that contribute to your score. Don’t skip out too early, she also offers a few key insights for how to fix your credit score if it is not quite where you would like it.

What is a Credit Score?

“A credit score is a three-digit number that ranges from 300 to 850 and is used by lenders to assess your creditworthiness, or how likely you are to repay a loan on time. The higher your credit score, the less risky you are considered to be by lenders, and the more likely you are to be approved for loans and credit cards at lower interest rates,” says Michelle.  To better understand credit score range visit experian.com here.

There are five main factors that affect your credit score:

Payment history (35%)

Your payment history is the most important factor in your credit score. This includes whether you have made your payments on time in the past, and whether you have any late payments or collections on your credit report.

Credit utilization (30%)

Your credit utilization is the amount of credit you are using compared to the total amount of credit you have available. For example, if you have a credit card with a $10,000 limit and you have a balance of $5,000, your credit utilization is 50%. Ideally, you should keep your credit utilization below 30% to improve your credit score.

Length of credit history (15%)

The length of your credit history is also important. The longer you have had credit and the more consistently you have used it responsibly, the better your credit score will be.

Types of credit used (10%)

The types of credit you use also affect your credit score. Having a mix of different types of credit, such as credit cards, installment loans, and mortgages, can help to improve your score.

New credit (10%)

Opening new lines of credit can hurt your credit score in the short term, but it can also help to improve your score in the long term if you manage them responsibly.

You can check your credit score for free from annualcreditreport.com. You can also get your credit score from your credit card company or bank.

What if I have a low credit score?

There are a number of things you can do to improve it, such as:

  • Pay your bills on time
  • Keep your credit utilization low
  • Don’t open too many new lines of credit
  • Dispute any errors on your credit report

It takes time to build good credit, so be patient and don’t give up.

If you are not currently working with a lender and would like to talk with Michelle in more detail about your specific situation contact her at: michelle.schmidt@movement.com

If you are not already connected with an agent connect with us by filling out a request form here.