Your credit score can affect your ability to get a mortgage. Mortgage professionals rely on such scores to assess whether you’re a candidate for a loan.
A credit score is more or less a rating of how a person is able to manage the credit that he or she has available.
Creditors, such as credit card companies and the like, report information such as payment history to credit bureaus, the primary ones being TransUnion, Experian and Equifax.
When your mortgage professional pulls your credit, he or she will receive information from all three bureaus. The middle score of the three will be used to determine the credit score that will be used by your lender.
All three bureaus have scoring models, which take many factors into consideration when determining a score for you. The scoring models are similar from bureau to bureau, but individual scores may vary depending on what information they have when your report is run. The most significant of these are recent payment history and how much debt you have in relation to how much credit you have available to you.
Recent payment history is significant in that if you’re having challenges keeping up with your current debt in a timely fashion, adding more debt to the mix, as in a mortgage, will draw attention from lenders.
Balance-to-limit ratios on your revolving debt, as in credit cards, are indicators of how well you manage the credit that’s available. Having multiple cards that are close to their maximum limits may indicate that you are overextended. Keeping your balances low keeps your credit scores higher.