It is definitely a great time to purchase real estate and a key factor in your ability to do so is tied to your credit report. Every point in your score can make a difference when applying for a home purchase loan. Understanding how your credit is rated will help you to get prepared for your new home purchase.

35% Payment History – It’s pretty much a no-brainer that you have to pay your bills on time to achieve or retain a good credit rating. Thirty days or more past due, judgments, collections and charge offs are going to take a toll on the rating. Clean payment history for the past two years will have more effect than what occurred prior to that.

30% Credit Balances – The ratio between the outstanding balance and the available credit. Zero balances are good and definitely below 30% of the available credit used if you are planning to enter into a loan transaction within the next 3-6 months.

15% Credit History – The length of time since a credit line was established. A seasoned borrower is stronger in this area.

10% Type of Credit – Mix it up. Auto loan, credit card and mortgage history is more positive than just credit cards…….that doesn’t mean it’s better to have a big car payment!

10% Inquiries – This is the most frustrating of all, as sometimes you see inquiries from businesses, credit card companies or insurance companies that you have not authorized. Each inquiry, up to 10, can negatively affect your credit score by 5 to 30 points.

Now that you understand how your credit is rated, let me know when you are ready to get qualified for a home purchase!