Is my credit good enough?
Your credit is one of those things that you never really think about until you need it, and then it’s all you can think about. What is my credit? Is it good enough? What do I do if it’s not? Take a deep breath and relax! Everybody worries about their credit when it comes time to buy a house, but we’re here to help you take the steps you need to qualify.
What credit score do I need?
Most loans require a minimum credit score of 640, BUT some loans are available with a lower minimum score. It all depends on the type of loan you are getting. Even if you don’t have stellar credit right now, that doesn’t mean you never will. Every year we help hundreds of people who started out with less-than-perfect credit achieve their goal of owning a home. But before you can even start the process, you have to know your credit.
Do you know your credit?
Many people miss out on their dream of owning a home because they just assume they have bad credit… but they’ve never even bothered to check! That’s like assuming you’re sick but not going to the doctor to find out. If you don’t check, you’ll never know. We can perform an initial review for you and let you know where you stand.
So your credit does need a little work. What now?
If it turns out that you do have unsubstantial credit, our commitment won’t stop. We have good friends in the credit repair department who can help you get your credit where it needs to be, whether that means establishing your credit or repairing it. You may also have other options including a cosigner and lease-to-own.
What you need to know about credit scores
Maybe you don’t even know what a credit score is, in the first place. That’s okay! Here’s Credit Scores 101, just for you.
What is a good credit score?
Good (700 – 749)
Fair (650 – 699)
Poor (600 – 649)
Bad (below 599)
What’s on my credit report?
- Your personal information: Your birthday, address, and employment
- Consumer Statement: If you had credit with a company that went unresolved, your statement will be on your credit report
- Account histories
- Public records
- Creditor contacts
Every time something changes in your credit, like when you open a new credit card, take out a new loan, close an account, miss a payment, or change your address, your credit report changes too. Negative records will only stay on your credit report for 7-10 years, but a positive record can stay on for longer than that.
What’s makes up my credit score?
Your credit score is not the same thing as your credit report. Your credit score is a number that is calculated based on five factors.
- Payment History—35%
Making payments on time on other accounts is a good indicator that you’ll do the same on new accounts, so that is what lenders will look at first.
- Amounts Owed—30%
Having credit accounts and owing money on them isn’t necessarily a bad thing, so don’t assume you have bad credit just because you have credit cards or loans. What you want to be careful about is to monitor the amount of your credit balance relative to your credit limits. Experts say to only carry 30% or less of your credit limits each month whenever possible. So if, for example, you have a credit card with a $1,000 limit, try to never carry a balance of anything more than $300 from one month to the next.
- Length of Credit History—15%
Generally, it looks better if you’ve had credit for a long time. You can still have a high credit score even if you are young or haven’t had credit for very long, though depending on the other factors in your credit report. Lenders look at the age of your oldest account, the average age of all your accounts, how long each account has been established, and how long it has been since you used your accounts.
- Type of Credit in Use—10%
There are a lot of different kinds of credit. You can have home loans, school loans, store credit accounts, credit cards, installment loans, and more. The different types of credit you have matter, and it helps to have a variety of credit types.
- New Credit—10%
If you opened a lot of new accounts recently, you look like a higher risk. If you are attempting to repair credit or establish credit, it can temporarily lower your scores when you obtain new credit, although it can be beneficial in the long run if you maintain a good history with a newly established account.