Here’s How Your Credit Score Is Calculated

Your credit score is the most important factor in determining if you qualify for a loan. It is also crucial in shaping the terms of your loan. A credit score is a three-digit number that a lender uses to decide how trustworthy you are when it comes to managing your finances and your ability to repay a loan. The higher your score, the less risk you are to the lender and the more optimal the terms of your loan will be. Credit reporting agencies use seven primary factors in calculating your score.

1. Your payment history is the most important because it reflects on-time payments, missed payments and those that were late.

2. The ratio of the amount of credit you are using against your available credit is factored in. Try to keep credit balances no more than 30% of the available credit.

3. Total debt will be part of the credit score calculation. Loans, collections, credit cards and other credit accounts are part of the equation.

4. The credit score will reflect what the mix of your credit accounts are. It looks at auto loans, mortgages, store credit and credit cards.

5. The age of your credit accounts are an element of your credit score. Older histories have less impact on your score than more recent credit histories. Lenders want to see established histories of on-time payments.

6. Inquiries into your credit by various entities are known as hard inquiries. Too many inquiries will lower your score.

7. Credit scores are impacted by debts that show up in public records. These include tax liens, civil judgments and bankruptcies. Paying off any of these liabilities will increase your credit score.

Call or email me and I will help you navigate what impacts your credit score so you can have the best loan options.

4 Tips to Help You Save for a Home

Saving for a down payment for a home doesn’t have to be a big challenge, nor does it have to have a big impact on your everyday budget. If you can build up a big enough savings account without having to drastically change your spending habits, then you can be motivated to do what you need to do to make homeownership a reality.

1. The easiest way to start your savings plan is to have a portion of your paycheck directly deposited into your savings account. If your employer will agree to make a split deposit on your behalf, this is the perfect way to not spend your entire income on everyday incidentals. If what goes into your savings is a reasonable amount, you likely won’t miss it, and you can still meet your essential monthly spending obligations.

2. Analyze where you spend small amounts of money on a daily basis. Money spent on coffee and snacks or drinks after work can add up to as much as $50 a day. Cut back on these nonessential items and direct those funds to your savings.

3. Small change adds up. Supplement your larger checking account transfers with periodic smaller amounts that don’t impact your budget.

4. Reduce your overhead by downgrading your living space and monthly rent. Live small, and you will find that the money saved can quickly increase your savings balance.

Call or email me today, and we can evaluate your financial situation and come up with a custom plan to help you save.