Lenders offer the best rates to those with the highest credit scores. Generally, the higher your score, the more attractive your rate and the lower your monthly mortgage payment. As such, knowing your credit score, in addition to obtaining your credit reports and understanding your credit history, is important in the home buying process.

The three main credit bureaus—Equifax, Experian and TransUnion—create your credit reports, which credit scoring models like VantageScore and FICO use to develop a score that typically ranges from 300-850. The credit bureaus can also calculate scores for you based on their own proprietary models.

Your score will never factor in personal information, such as your race, gender, religion, marital status or national origin.

VantageScore, FICO, and other credit scores generally consider the following factors when calculating your scores, such as:

  • -Your payment history
  • -How long you’ve had credit
  • -The types of credit you have (credit cards, auto loans, student loans, mortgages, etc.)
  • -Your credit limits and how much of those limits you’re using (i.e., it’s best to use less than 30 percent of your available credit)
  • -How much debt you have
  • -Hard inquiries on your credit report

Your scores may vary, but they are all based on the information in your credit reports. Checking your reports regularly can help you see what’s impacting your score so you can have an idea of where you could improve.

There may also be errors in your report, which you should challenge immediately, long before you apply for a loan. The removal of errors should increase your credit score and make your application more attractive to the lender.

Further, you may wish to delay applying for a home loan until you can improve your credit score. Many borrowers do this by paying down credit card balances.

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