How To Understand Your Credit Score

How To Understand Your Credit Score 

Your credit rating tracks your financial behavior and demonstrates your ability to pay back borrowed money. It will also be a significant component to determining what type of loans you qualify and the types of interest rates you can obtain; essentially, the higher your credit score is, the better chance you have at qualifying for good rates. If you are ready to apply for a home loan in Palm Beach, Tri-County, or Broward County, Florida, and interested in exploring your available rate and loan options, CTC Mortgage can help. Continue reading to learn more about how to understand your credit score.  

How Does Credit Scoring Work?  

Lenders use a person’s credit score to determine whether or not to lend a borrower funding for credit cards, auto loans, home mortgages, etc., and they also use this score to establish a borrower’s interest rate and credit limit. Your credit score is based on several factors, including your bill payment history, the amount of accounts that you have and how long that they have been open, your current amount of unpaid debt, and any previous financial defaults, such as a bankruptcy or foreclosure. Your credit score will be a three digit number ranging anywhere from 300 to 850. If you have a history of paying back money in a timely manner and no history of defaulting on a loan, your score will be higher, which makes it easier to become qualified for a loan. A good credit score rating will depend on the lender, however, typically a score of 740 or higher will be considered “very good”.  

What Are Some Ways I Can Raise My Credit So I Can Get Better Rates?  

Fortunately, if you have a less than ideal credit score, there are certain steps you can take in order to increase your score to increase the likelihood of obtaining a mortgage and getting a better interest rate. Some ways to increase your credit score include:  

• Ensure that you pay current bills on time – In order to see a significant change in your credit score, it will be necessary to make payments on time for six months or more.  

• Review your credit history for errors – It is important to evaluate your credit history and perhaps even hire a credit monitoring service to ensure that all information is secure and there are no flaws in your report.  

• Keep older accounts open – Even if you no longer use a financial account, it is advisable to keep it open, in fact, closing an older account could potentially lower your credit score.  

• Extend your credit limit – If you have credit cards in good standing, you can ask the company to increase your limit, which in turn reflects a higher credit rating. It is important to note that you don’t max yourself out on the new limit, and you should prioritize paying off other debt instead.  

If you are interested in learning more about how your credit score impacts your mortgage and interest rates  in Palm Beach, Tri-County, or Broward County, Florida, contact CTC Mortgage today for a consultation.