Credit Score Components

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Your credit score affects your ability to get a mortgage. Do you know what makes up your credit score? What about your credit history? No, these aren't questions you should be afraid to ask. Understanding these components can help you improve your credit score and increase your chances of getting approved for a mortgage.

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Your credit score is a key factor in determining your eligibility for a mortgage. It's made up of several components, including the mix of credit accounts you have, your use of new credit, the length of your credit history, your payment history, and the amount you owe.

10% of your credit score is based on your credit mix, which includes credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans. It's not necessary to have one of each, but a diverse mix of credit accounts can be beneficial.

10% of your credit score is based on new credit, and opening several credit accounts in a short period of time can be seen as a risk factor, especially for those with a shorter credit history.

15% of your credit score is determined by the length of your credit history. This includes how long your credit accounts have been open, how long the credit account has been established, and how long it has been since you used your accounts. In general, a longer credit history will increase your score.

35% of your credit score is based on your payment history, which is the most important factor in determining your creditworthiness. Lenders want to know if you've paid past credit accounts on time, and a good payment history can help you build a healthy credit score.

Finally, 30% of your credit score is based on the amount you owe. If you are using a large portion of your available credit, it may indicate that you are overextended and at a higher risk of defaulting on a loan. Keeping your balances low and making timely payments can help you maintain a healthy credit score.

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