Blog posted On September 23, 2020
If you’re thinking about buying a new home or refinancing an existing mortgage, you’re probably taking a closer look at your credit score and ways to improve it. Your credit score, specifically your FICO® credit score, is used by lenders and financial institutions to determine whether you will be a good candidate for a loan, or a line of credit based on how you currently manage your debt. Many non-bank institutions also look at your credit score. Your credit score matters, even if you’re not actively making mortgage moves, and could impact your ability to rent an apartment, get a new phone, or even influence your car insurance premium.
Your credit score reflects your payment history, total amounts owed, length of your credit history, credit mix, new credit. Lenders use it to determine if you are a “good risk” for a loan or other line of credit, but so do other non-bank entities. When you apply to rent a home or apartment, your landlord or property manager may use your credit score to determine whether or not to rent to you. Similarly, a utility company or cable provider may run a credit score. Since payment history influences your credit score, your credit score will show these institutions that you pay your bills on time.
Credit checks are also popular with cell phone providers. As cell phones become increasingly expensive and many consumers finance their new phone purchase into their monthly bill, your credit score becomes especially important. If you want the latest phone, you’ll have to prove you responsibly manage your debt.
Building or repairing credit takes time. If you’re interested in improving your credit score, start with two of the most significant credit score factors, your payment history and total amounts owed. Paying your bills on time and reducing your overall debt will help boost your credit score. Lower weighted factors like length of credit history, credit mix, and new credit also matter, to a lesser extent.
If a new home purchase or refinance is in your future, your credit score becomes even more important. If you have any questions about whether or not your credit score needs some work before you apply, let us know.