What is My Credit Score, and Other Credit Questions

What is my credit score currently? What factors make up my score? How do I know if it’s good or bad? How much does it affect my chances of getting a mortgage loan?

These are some of the most frequently asked questions relating to consumer credit. In this article, we will address all of these topics and more. Let’s start with the title question:

1. What is a credit score, exactly?

Your FICO credit score is a number between 300 and 850. The higher the number, the better your credit. This score is based on your financial history, which is documented in your credit reports. (The data from the report gets put through a scoring model, which produces a score).

Lenders and creditors use this information to assess risk. If you have a bad score, it means you’re more of a risk. So the lender might not be willing to lend you money. Or if they do, they might charge a lot of interest on the loan. On the other hand, a good credit score will open up a lot more financial doors for you.

2. What is my credit score right now?

There’s only one way to find this out. You have to request your scores (you have three of them) to find out where you stand. I recommend using the MyFICO website, because it’s the easiest way to go straight to the source. This website is owned by the company that designed the credit-scoring model used by most lenders. I’ve included a link to their website below.

3. My score is [fill in the blank]. Is this good or bad?

Numbers are meaningless until you put them into perspective. So let’s talk about what makes a good, bad or excellent score. According to Experian (one of the three credit-reporting companies), the average credit score in the United States is about 692. At least, it was when I wrote this article. So when you find out what your score is, you’ll know where you stand relative to the national average. Here is some more information you’ll find helpful…

• Most mortgage lenders use 620 as the minimum acceptable score.
• To qualify for the best interest rates, you’ll probably need a 750 or higher.
• It’s possible to qualify for an FHA home loan with a score below 620.
• If you have a 580 or above, you could put as little as 3.5% down on the FHA loan.
• If your FICO number is below 580, you’ll have to put at least 10% for an FHA loan.

Now you’ll be able to answer two of the FAQs: What is my credit score, and where do I stand? Let’s talk about some of the other things you can control.

4. What can I do if my score is low?

You can do plenty. Many people think that a bad credit score will follow them for years, and that there’s not much they can do about it. While it’s true that negative entries can stay on your reports for up to seven years, there’s still plenty you can do to improve your score. This article explains some of the steps you can take to boost your FICO numbers within months (instead of years).

5. What is the benefit of having good credit when buying a home?

To recap, we have answered the common question: What is my credit score, and how can I control it? Let’s talk about the benefits of having good credit. We’ve touched on some of these things above, but I want to compile them in one place for you.

There are actually several benefits of having a good FICO number. For one thing, you’ll have a much easier time getting approved for a home loan. Secondly, you’ll probably qualify for a lower interest rate on the loan (compared to a person with a lower score). This can save you thousands of dollars over the term of the mortgage. So the two biggest benefits are (1) an easier qualification process and (2) less interest paid over the life of the loan.

What is my credit score and why does it matter? Now you know the answers to these common home-buying questions. If you would like to learn more about this subject, just click the “credit” link in the main menu above. You’ll find plenty of related information on the site. Good luck .