My dad once got really irritated to find out that he did not have a perfect 850 FICO credit score. He had asked me to order is credit report and score once. The report came back very clean as expected but the credit score was 824. He didn't understand it. He has no debt, pays all of his bills on time and has forever, and pretty much pays cash for everything. Why wasn't his score a perfect 850? Now I know that my dad was really not that upset about his score but he did have questions about what factors are used to determine his score.
Credit scores are used to determine a person's credit worthiness. Are you able to purchase a home or get a car loan? Employers now even look at credit scores when factoring in whether or not to hire someone. They use it as an indicator as to the type of person that is applying for a job with their company. If they have a substandard credit score, that may be an indicator that they are not dependable and not suitable for the job in which they are applying.
What are the things that affect a person's credit score? When looking into this question, 5 major items come to surface: Credit History, Type of Credit, Outstanding Balances, Payment History, and New Credit.
Credit History: A good length of credit history will typically increase your score over someone that has just started with a credit account. That is not to say that someone that has just opened a new credit line can not have a high credit score, just that longer history is generally better for a higher score. Your score takes into account how long specific accounts have been established and how long it has been since you have used those accounts. A person's credit history makes up about 15% of the equation for your overall credit score.
Types of Credit: A mixture of different type credit accounts is better than just one. Your FICO score will be much more positively affected if you have a mix of credit cards, installment loans, retail accounts, car loans, and mortgage. This group of accounts is more favorable than if you had 6 or 7 credit card accounts only. Your types of credit available makes up 10% of the credit score equation.
Payment History: This is the most important part of the credit score equation. Payment history controls 35% of your credit score based on how you pay your bills. Paying debt on time and in full has the largest positive impact on your FICO score. The first thing any lender wants to know is if you have been paying your bills on time. You are in complete control of this portion of the equation and therefore it speaks the loudest to the creditors.
Outstanding Balances: Having credit accounts and owing money on them does not mean that you will have a low credit score and that you will be seen as a high risk borrower. The important factor is the ratio of debt owed to the total amount of credit available to you. For example, if you have a credit card that has a $5000 limit on it, you don't want a balance owed of $4990. You want to keep the ratio of debt owed below 50% minimum and even better, below 30% to maintain no negative affect on your credit. In our example, that would be at minimum under $2500 (50%) and better yet, less than $1500 owed (30%) to maintain a healthy credit profile.
New Credit: More commonly known as Inquiries, New Credit refers to either the opening of new credit accounts or having creditors looking into your credit worthiness to check to see if they should loan you money. Opening several credit accounts in a short period of time can possible represent a greater credit risk to a lender and have a negative impact to your score. Mortgage inquiries do receive special treatment and up to 20 inquiries can be made in a 14 day period and will only be seen as 1. These are what are known as "soft pulls" on your credit.
Credit scores are very important and a valuable tool. It is the absolute first thing any lender is going to look at when trying to determine your credit worthiness when determining your eligibility to qualify for a mortgage loan. If you are wanting to purchase a home in the greater Raleigh area (Cary, Apex, Holly Springs, Wake Forest, Fuquay Varina, Clayton,....) and not sure about your credit worthiness, the Kima Real Estate Group is here to help. We work with several fantastic local mortgage professionals and will be happy to recommend one to you or better yet have them get in touch with you. Give us a call today. We are here to assist you through every step of the real estate journey, on your way to home ownership. 919-443-0200
Author:Chad Wingler Phone: 919-323-2616 Dated: May 11th 2015 Views: 1,793 About Chad: Buying a new house is one of the largest steps a person makes in their life; emotionally, physically...
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When it comes to providing the utmost in personal service to his clients, Peter Kima is on the cutting edge. This family man's demanding work ethic was passed on from his parents. His mother, a first generation German-American, forged a new life in a strange country. His father, who has not missed a day of work since 1972, led by example. Peter does not rest until he's done everything in his power to help you achieve your goals. As a husband and a father, his understanding of the importance of a family's home is reflected in his every move.
When Peter is not helping one of his clients, he can be found volunteering his time running a charity Lobster Bingo event, cooking burgers at the local Fire Station to benefit the children in the community, delivering dictionaries to every 3rd grade student in Wake County with his Kiwanis Club, collecting school supplies for the needy, or ringing the bell for the Salvation Army. His favorite pastime, however, is spending time with his wife, Jennifer, and their two sons, Cole (12) and Camden (9 going on 20!).
Peter has resided in Germany, California, Georgia, Indiana, Massachusetts, North Carolina, Oregon and Vermont. Having lived in North Carolina for over 10 years, Peter refers to North Carolina as home. Don't underestimate the value of Peter's moving experience. He and his team understand the rigors involved in making a family move. Rely on that experience to help you.
I have been helping buyers in the Raleigh Real Estate market for over
"I recently relocated to Raleigh from Destin. Florida and was very fortunate to have Peter Kima as my real estate agent. After my first phone conversation with Peter, I was convinced that he would work aggressively on my behalf to find me a house that fit all the criteria I requested in a home. Peter got to work immediately and began sending me home listings to view prior to my trip to Raleigh.
Upon meeting Peter in Raleigh, I was very impressed with how organized and well prepared he was for our first day of house hunting. He made sure to keep my specific requirements in mind when choosing homes for me to view. Peter was very efficient and organized which was critical to me as I only had three days in order to find a home. I did find the perfect house and Peter worked diligently on my behalf from writing the offer to the closing. Since I was out of town, Peter arranged all of my inspections and made sure that all necessary repairs were made prior to my arrival in Raleigh.
I imagined it would be very difficult to coordinate all that goes into an out of state move but Peter made the entire process absolutely pain free! I would recommend Peter Kima to anyone looking to buy or sell real estate because he genuinely listens to his client's needs and goes above and beyond his duties as a real estate agent."