How to Achieve and Maintain a Good Credit Score
In today’s financial sphere, having good credit is a necessity. Whether you are financing a large purchase like a vehicle or starting the process of buying a home, your credit score is a critical factor in deciding your eligibility for a loan, as well as the terms of that loan.
But to many people, a credit score and its importance are mystifying. Let’s go over what makes a credit score so important and what you can do to get your score where it needs to be.
What is a Credit Score and Why is it Important?
Put simply, a credit score is a numerical value that determines an individual’s creditworthiness, which is the ability and likelihood of an individual to pay back a loan.
Lenders use this score to evaluate whether an individual can receive a loan, or to determine if someone is considered too risky to extend a loan. If a lender does decide to extend a loan, the person’s credit score will greatly affect the terms of the loan.
When it comes to purchasing a home, your credit score will impact the types of mortgage products you may qualify for and possibly even the offer you can make on the home you’d like to buy.”
“Many potential homeowners are left in the dark when it comes to understanding their credit score. And sometimes a search of the internet for clarity can lead to misinformation,” explains Amy Wilemon, Senior Loan Originator with Silverton’s Wilpower Team. Amy goes on to say, “To combat this, the Wilpower Team offers transparency and education to help our clients navigate the homebuying process as seamlessly as possible”.
How is My Credit Score Calculated?
Although to some it may seem like a credit score is just a random number, there’s actually a formula at work behind the scenes. There are several different types of credit scoring models, but generally speaking, your credit score is derived by a formula that will take into account payment history, current amount of debt, length of credit history, new credit applications, and the variety of credit you have established (personal loans, credit cards, auto loans, etc) to determine your credit score calculation.
How Can I Improve My Credit Score?
Fixing a bad credit score may take some time, but the steps to do so are simple and attainable.
“A bad credit score can leave clients feeling overwhelmed and discouraged,” says Carrie Powers, Senior Loan Originator with Silverton’s Wilpower Team. “However, once you are equipped with the right knowledge, you can start making positive steps towards a better credit score,” explains Carrie.
Here are 4 simple steps to help raise your score:
- Pay all of your bills on time.
- Open a line of credit and use it responsibly as early as possible.
- Do not constantly open new credit cards and take out new loans. Each new account will lower your credit score for a while
- Pay down your debt as much as you can. You want to aim for less than 30% utilization
(that means using 30% or less of whatever your credit limit is).
Contact Us to Understand Your Credit Score and Mortgage Options
Silverton’s Wilpower team is equipped to help make your home buying process as simple as possible.
Contact one of our dedicated team members today to learn more about your options