Credit Report Tips

Why is it important?

Lenders such as banks and mortgage companies use your credit score to determine whether or not you are likely to make your monthly mortgage payments on time.

What determines the strength of your credit score:

  • Payment history: the percentage of payments you have made on time
  • Credit card use: how much credit you use relative to your available credit limits
  • Derogatory marks: bankruptcies, tax liens, collections or civil judgements
  • Credit age: average age of your open credit accounts
  • Total accounts: total number of open and closed credit accounts
  • Hard inquiries: the number of times you have applied for credit

Ways to establish credit

  • Open accounts, starting with bank account. Mortgage lenders will require your bank account information to determine the source of your down payment
  • Use credit responsibly. Maintain a debt-to-income ratio that is below 40%
  • Pay your bills on time: payment history is the most important factor

Ways to fix your credit

  • Know what is on your credit report. It is important to frequently check your credit report. Many services provide consumers with free credit reports
  • Pay bills on time. Payment history is the main determining factor of your credit score
  • Pay down debt. It is important to keep one’s Debt-to-income (DTI) ratio low. Lenders typically require home buyers to have monthly debt which does not exceed 40% of their monthly income
  • Some ways to pay down debt include: paying more than the minimum payment, stop credit card use, use cash only, create and stay within a budget
  • Avoid opening new accounts. Opening new accounts can impact your credit by increasing your debt. Also, each time you open an account, a hard inquiry appears on your credit report

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