January is often the time of financial reflection. The holidays are over the joy of giving has been replaced by the reality of dealing with all the credit card bills. When reviewing which bill payments take priority, remember to keep your credit score in mind, as home buyers who are seeking a mortgage find out early how important their credit score is in the home buying process and in determining the interest rate that a lender offers.
WHAT IS A CREDIT SCORE?
A credit score is a number that lenders use to estimate risk. Experience has shown them that borrowers with higher credit scores are less likely to default on a loan. Credit scores are generated by plugging the data from your credit report into analytical software. Credit reporting agencies don’t necessarily use the same scoring software, so don’t be surprised if you discover that the credit scores they generate for you are different.
Credit scoring software only considers items on your credit report. Lenders also look at other factors that aren’t included in the report, such as income, employment history and the type of credit you are seeking.
Borrowers with good credit scores are typically offered more financing options and belter interest rates, but don’t be discouraged if your scores are lower, because there’s a mortgage product for nearly everyone. Please call me with your questions on the types of financing available for your particular financial situation.
The pie chart shown here shows a breakdown of the approximate value that each aspect of your credit report adds to a credit score calculation.
Dave Cooke is a Calgary mortgage broker. For more information contact him at 403-836-1201 or visithis website