If you’re planning on applying for a Florida mortgage, your credit score is going to strongly affect the success of your application, the interest you pay, and the down payment that may be required. Many people don’t know how their credit scores are calculated and don’t understand how their actions can affect those scores. In fact, there are five categories involved in your credit score. Let’s look at the categories and what you can do to improve them.1

Payment History: 35 Percent of Your Score

The best way to affect this portion of your score is to pay your bills on time. Rent, car payments, credit card bills, and any other important bills will affect your credit rating if you pay them late. Consider signing up for online bill payment rather than mailing checks – it’s faster and more secure. If you have trouble remembering, you can create reminders or have funds automatically withdrawn to pay your bills.

Amounts Owed: 30 Percent of Your Score

Don’t max out your credit cards! Keep your balances low and pay more than the minimum payment. But be careful – don’t close unused credit cards. That can actually lower your score (see below).

Length of Credit History: 15 Percent of Your Score

This is why you don’t want to close unused accounts – that can lower your average account age. By the same token, don’t open lots of new accounts, because that will also reduce your average.

New Credit: 10 Percent of Your Score

Don’t apply for every credit card that offers a good deal. Your score will be lowered by a flurry of new credit applications. If you don’t have credit, you’ll need to open some new accounts and pay them off responsibly to raise your credit score over the long term.

Credit Mix: 10 Percent of Your Score

In general, having a mixture of types of credit, like credit cards and installment loans, and making timely payments, will improve your score. For example, someone who has a car loan but no credit cards will have a lower score than someone with both a car loan and credit cards, if they’re both making regular payments. But don’t run out and open lots of credit card accounts – it won’t help your score in the short term.

At Embrace Home Loans, we understand how your credit score can affect your ability to get a Florida mortgage, and we can help you “put your best foot forward” when you’re ready to buy a home. For more information, contact us today at 407-733-6425.

1 http://www.myfico.com/credit-education/whats-in-your-credit-score/