6 Credit Factors Mortgage Lenders Look at on Your Credit Report

6 Credit Factors Mortgage Lenders Look at on Your Credit […]

September 21, 2021

6 Credit Factors Mortgage Lenders Look at on Your Credit Report

Although your credit score gives mortgage lenders a glimpse of your past and current financial standing, it does not reveal the entire picture. To determine if your credit history meets the established guidelines, mortgage lenders must look beyond the tallied score by reviewing the information on your full credit report. Your credit report features seven important factors that are used to create your overall score. Your lender will explore each of these factors to weigh the risks and determine if you qualify for the selected mortgage program. Here’s what you need to know about these six credit factors mortgage lenders will examine.

Open Account Tally

Mortgage lenders look at your total number of open accounts to see how you handle the management of your finances. Although there is no magic number to adhere to when it comes to a total number of open accounts, it helps to have a few revolving and installment accounts to establish your credit history.

Credit Accounts Age

A lengthy history of good credit management is reflected in the overall age of your credit accounts. The oldest credit cards and lines on your history reflect your commitment to paying the balances on time to keep the accounts in good standing. A high credit age also tells lenders about your ability to avoid signing up for new cards every time an offer arrives in your inbox or mailbox.

Outstanding Debts

Outstanding debts on your credit history sends the message that you are unable to pay all of your obligations in full and on time. Even if the accounts were reported as unpaid by mistake, you must eliminate all of these marks on your credit history to meet the qualification guidelines for your lender.

On-Time Payment History

A positive on-time payment history reflects your ability to fulfill your debts on the given schedule. Just one payment made 30 days late can cause your credit score to drop a considerable amount. The best way to avoid this costly mistake is by placing your monthly payments on auto-pay through your bank or credit union.

Credit Utilization

Credit utilization reveals your ability to practice self-control and maintain a positive financial standing despite having credit available for use. Your utilization ratio is found by dividing your overall debt from credit cards and lines by the total credit limit across all accounts. To keep your credit score in check, make sure your utilization ratio never rises above 30 percent.

Credit Inquiries

Whenever you apply for a new credit account, including auto loans and credit cards, the lender in question pulls your credit history, resulting in an inquiry. As the inquiries quickly add up, your credit score starts to drop to reflect this flurry of activity.

If any of these six factors fall short, your credit score and overall history will suffer until you repair the damage. You can actively improve your credit standing by repairing these areas with help from the team at Build My Scores. You can schedule a free consultation with credit repair experts by calling 866-611-9531 or navigating to the contact form on our website.

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