loading...

First-Timer Primer: The Credit Score Basics

by UrbanTurf Staff

image

This week in First-Timer Primer, we’re taking a basic look at credit scores, which you’ll need to be familiar with in order to secure a mortgage. We’ve talked before about how a small mistake can make a big difference when it comes to your credit score. Now we’ll look at how to understand your score and maintain one that will enable you to secure a good interest rate on your mortgage.

How a Credit Score is Determined

Your mortgage FICO score comes courtesy of three credit bureaus: Experian, Transunion and Equifax. More than 30 factors and criteria determine your score at each bureau, according to Jennifer Landgraff of Caliber Home Loans. The majority, or 65 percent, of the score is based on two factors, Landraff says: Your utilization rate, which is the balance of your credit card compared to its total limit; and your payment history. To have a great score, most experts recommend keeping your utilization rate below 30 percent, meaning the balance on your card at the end of the month shouldn’t exceed 30 percent of your limit.

How to Build Credit

In order to start building credit, you’ll need at least six months of credit history and at least one account with activity in those past six months. “A simple credit building strategy would be to make timely payments and keep balances low on credit card accounts,” Landgraff said.

What Hurts a Credit Score?

Unfortunately, plenty of things can have a negative impact on your credit score. They include late payments and any overdue payments that have been sent to a collection agency, as well as judgments, tax liens and bankruptcies. Landgraff points out that the past six months of credit history plays the most important part in determining your credit score. So even if you have some negative credit history in your past, it’s not too late to start building up your score again.

How Long Does It Take to Turn a Good Score into a Great One?

If you’re already doing well on the credit front, it may not take very long to raise your score.

“I have worked with clients where I have been able to increase their credit score in a week, but other cases it might take two months depending on the score and what needs to be done to improve it,” Landgraff said. That may include paying down a credit balance or updating and correcting inaccurate information that’s contributing to a poorer score.

What Score Secures the Best Mortgage Rate?

If you want the best possible interest rate on a conventional loan, you’ll want a score of 740 and higher on your credit report. But note that you don’t need to have a score that high to get a decent rate when dealing with some lenders. To secure an FHA loan, for example, you don’t need such a high score, though having it can’t hurt.

How Can I Find Out What My Credit Score Is?

You can go to AnnualCreditReport.com to get a free copy of your credit report from all three credit-reporting bureaus once a year. This site is government-recommended and your best bet for avoiding credit report scam sites, but it won’t tell you your numerical credit score. Still, it’s worthwhile because the report gives you an idea of whether or not you have any inaccurate information on your report that needs clearing up before you start pursuing that home loan. There are free services that will tell you what your Experian, Transunion or Equifax credit score is, but make sure you vet these sites before supplying your personal information, and don’t use a service that requires you to hand out a credit card.

FICO offers a paid service to view your credit scores from each of the three major bureaus, but it’s pricey. Quizzle is a free service recommended by many because it gives you access to both a new VantageScore credit score and Equifax report every six months. Your VantageScore is different from your FICO score — you can look into the differences here.

Lenders still generally use FICO, though, so while the free insight into your credit report provided by sites like Quizzle may be helpful, it won’t necessarily give you an accurate read on what to expect when you walk into the lending office. For that, you may need to work with a lender or pay FICO for the privilege.

Similar Posts:

See other articles related to: first-timer primer, credit score, credit rating

This article originally published at http://dc.urbanturf.com/articles/blog/first-timer_primer_credit_score_basics/8950

2 Comments

  1. 4 Brothers Buy Houses said at 9:39 am on Wednesday September 17, 2014:

    Credit Karma should be mentioned.  A great way to get a free peek at your score every week, monitor accounts, and really dissect your performance.  I love it!  Plus it doesn’t count towards any “hard” inquiries when you use it. 

    Another tip for folks with higher score (to make them even higher) is simply asking your bank for credit line increases.  Even though you won’t use them, this will bump up your score rather quickly.

  1. Kes said at 10:55 am on Thursday September 18, 2014:

    Asking for credit line increases can help out with keeping your balance below 30% utilization, but you should find out if your bank or credit card company will do a hard credit inquiry before granting an increase, which can ding your score, especially if you have a few inquiries on there already from opening new accounts to build credit. Bank of America, for example, does a hard credit inquiry every time. Those inquiries last for two years each.

Join the discussion

UrbanTurf now requires registration in order to post comments. Register here, or login below if you are already registered.

Click here if you forgot your password.



DC Real Estate Guides

Short guides to navigating the DC-area real estate market

We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Visit guides.urbanturf.com or start browsing below!

Northern Virginia

Profiles of 14 neighborhoods across Northern Virginia

Ballston
Looking to Give People A Reason to Stay Past 6pm
Clarendon
Happily Straddling the Line Between City and Suburb
Columbia Pike
Arlington’s Neglected Stepchild is Getting a Makeover
Crystal City
Turning Lemons into Lemonade
Lyon Village
Developing An Air of Exclusivity?
Rosslyn
Hitting Its Growth Spurt
Shirlington
An Urban Village Hitting Its Stride
Del Ray
Virginia’s Small Town Near the Big City
Eisenhower Avenue
The Vibrancy Might Take a Few Years
Huntington
The Quiet Neighborhood By the Beltway
Old Town
Mayberry By The Potomac
Parkfairfax
132 Commerical-Free Acres
Downtown Falls Church
Staying the Same in the Midst of Change
Tysons Corner
Radical Change Could Be On The Way

See more Northern Virginia »

Maryland

Profiles of 14 neighborhoods in suburban Maryland

Annapolis
Small-Town Living in the State Capital
Bethesda
Bedroom Community Gets Buzzing Cache
Cabin John
In With The New While Maintaining the Old
Chevy Chase
Affluence, Green Lawns and Pricey Homes
Downtown Silver Spring
Experiencing a Resurgence After a Bumpy History
Potomac
A Suburb on Steroids
Rockville Town Square
Despite the Dynamism, Still Somewhat Generic
Takoma Park
More Than a Little Bit Quirky
Wheaton
A Foodie Magnet on the Verge of Change
Capitol Heights
Kudzu, Front Porches and Crime
Hyattsville
Glass Half Full or Half Empty?
Mount Rainier
Artists, Affordable Homes and A Silo Full of Corn
National Harbor
A Development Rises Next to the Potomac
Riverdale Park
A Town Looking For Its Identity

See more Maryland »

Northwest DC

30+ neighborhood profiles for the city's biggest quadrant

16th Street Heights
DC's Sleeper Neighborhood
Bloomingdale
Where (Almost) Everyone Knows Your Name
AU Park
One of DC’s Last Frontiers Before the Suburbs
Brightwood
DC’s Northern Neighborhood on the Cusp
Burleith
DC’s 535 House Neighborhood
Cathedral Heights
Do You Know Where That Is?
Chevy Chase DC
Not to Be Confused With the Other Chevy Chase
Cleveland Park
Coming Back After A Rough Year
Columbia Heights
DC’s Most Diverse Neighborhood, But For How Long?
Crestwood
An Island of Serenity East of the Park
Dupont Circle
The Best of DC (For a Price)
Foggy Bottom & West End
Where the Institutional Meets the International
Forest Hills
Ambassadors and Adventurous Architecture
Fort Totten
Five Years Could Make a Big Difference
Foxhall Village
350 Homes Just West of Georgetown
Friendship Heights
A Shopping Mecca With a Few Places to Live
Georgetown
History, Hoyas and H&M
Glover Park
One of DC’s Preppier and More Family-Friendly Neighborhoods
Kalorama
A Posh View From Embassy Row
LeDroit Park
A Quiet Enclave in the Middle of the City
Logan Circle
Trendy Now, But Not By Accident
Mount Pleasant
Sought-After Homes Surround Main Street in Transition
Mount Vernon Triangle
From Seedy to Sought-After
Palisades
The Long, Skinny Neighborhood at the City’s Northwest Edge
Park View
It’s Not Petworth
Penn Quarter/Chinatown
DC’s Go-Go-Go Neighborhood
Petworth
Getting a Vibrancy of Its Own
Shaw
The Duke’s Former Stomping Ground
Shepherd Park
DC’s Garden of Diversity
Spring Valley
A Suburb With a DC Zip Code
Takoma
Not To Be Confused With Takoma Park
Tenleytown
Not Quite Like Its Neighbors
U Street Corridor
The Difference a Decade Makes
Woodley Park
Deceptively Residential
Adams Morgan
No Longer DC’s Hippest Neighborhood, But Still Loved by Residents

See more Northwest DC »

Southwest DC

The little quadrant that could

Southwest Waterfront
A Neighborhood Where A Change Is Gonna Come

See more Southwest DC »

Northeast DC

Profiles of 10 neighborhoods in NE

Brookland
New Development Could Shake Up Pastoral Peace
Deanwood
A Little Bit of Country Just Inside the District’s Borders
Eckington
Not to Be Confused With Bloomingdale
H Street
A Place To Party, and To Settle Down
Langdon
The Northeast Neighborhood That Few Know About
Michigan Park
A Newsletter-On-Your-Doorstep Community
NoMa
Evolving from a Brand to a Neighborhood
Rosedale
Ripe for Investment Right About Now
Trinidad
The Difference 5 Years Makes
Woodridge
Big Houses, A Dusty Commercial Strip and Potential

See more Northeast DC »

Southeast DC

6 neighborhoods from Capitol Hill to East of the River

Capitol Riverfront
Still Growing
Hill East
Capitol Hill’s Lesser Known Neighbor
Congress Heights
Gradually Rising
Hillcrest
Notable for Its Neighborliness
Historic Anacostia
Future Promise Breeds Cautious Optimism
Eastern Market
A More European Way of Living

See more Southeast DC »

Upcoming Seminars ▾