Credit agencies take into consideration various factors when determining your credit score.
Components of Your Credit Score (In %)
Payment History: The largest component of your credit score is showing the ability to make regular payments to all creditors. Even one missed payment can cause your score to drop by over 90-100 points.
Outstanding Debt: The amount you owe is compared to your current credit limit to create your debt-to-credit ratio. The ideal figure for this ratio is 25%.
Length of Credit History: A longer credit history will generally increase your FICO score. Your score takes into consideration how long your accounts have been open, how long it has been since you have used certain accounts, and the spread between the age of your accounts.
Interest in Obtaining New Debt: A potential lender can see how many “inquiries” you have for new forms of credit. If you are trying to obtain financing for a home, you should not open any new accounts in the preceding time period.
Types of Credit in Use: Your credit score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. It’s not necessary to have one of each, and it’s not a good idea to open credit accounts you don’t intend to use.
Buyer Don’ts When Purchasing a Home
Don’t Make an Expensive Purchase: It’s best to avoid major purchases like furniture, cars, appliances, etc. until after closing. Lenders are pulling your credit prior to closing to make sure that you still qualify for a loan.
Don’t Get a New Job: Lenders like to see consistent job history. Generally, changing your job will not affect your ability to qualify for a mortgage loan. But in some instances, getting a new job during the loan approval process could raise some concern and affect your application.
Don’t Switch Banks Or Move Money Around: During the loan application process, you may be asked to provide bank statements for the last two or three months. To eliminate potential fraud, lenders may require a paper trail to document the source of all funds. Changing banks or transferring significant amounts of money between accounts could make it difficult to document your funds.
Don’t Disregard Your Lender’s Requirements: You may have been pre-approved for the loan but your work with the lender is far from over. In order to process your loan, you need to meet certain requirements. Your lender will need copies of your bank statements, pay stubs, and other paperwork. Failure to submit certain qualifying documents could delay your loan approval and closing date.
Source: danianniello.phmloans.com