Buying a home in Colorado Springs, manage your most valuable asset! Part I

Colorado Springs Vintage Homes is happy to feature a great article

on Managing Your Credit Score

Anza Goodbar, President of Clearview Mortgage

In today’s tumultuous market, your most valuable asset is your tri-merged credit or FICO score. Your credit report is the primary tool potential lenders will use to rate your credit worthiness or Risk Factor. There are three primary credit reporting agencies: TransUnion, Equifax and Experian. Credit scores may vary as all creditors do not necessarily report to each agency.

Each credit report is comprised of 5 weighted components:

Payment History 35%
Amount Owed 30%
Longevity of Credit 15%
Credit Use Patterns 10%
Types of Credit Used 10%

Let’s break it down and explore each component in further detail. We’ll begin with Payment History since it carries the most weight and can have the most impact.

Payment History:

The number one item a lender will look at is your credit history. That doesn’t mean you need to have a lot of credit open, however, the credit lines you have open must be paid on time. Most lenders will look at a 2-3 year history.

Items that will show up on a credit report include: major credit cards, auto loans, student loans, retail accounts, and mortgages. Late payments on any of these accounts will have the ability to tank your credit score!

Each credit report has a delinquent section which will document any collections items, unpaid child support, garnishments, judgments, liens or bankruptcies. These are quite serious to the risk assessor and may require a letter of explanation. When applying for a loan, these delinquent accounts should be outside of two years. While initially they have a serious negative impact on your score, as time goes on the impact will lessen.

Credit reports also tabulate late payments. It is imperative you know when your bills are due and you pay within a 30 day window. Only payments that are 30 days or more will be reflected on your credit report. If you know when your creditor reports to credit you can plan your payment before it posts to the credit report and possibly boost your score by reflecting the lowest possible balance on revolving accounts.

When applying for a home loan for a home in Colorado Springs, it is best not to open new credit lines as your credit score may initially drop. If you do not have at least three open lines of credit, you may want to start with a secured line of credit from any national bank to start building your credit. It is also a wise practice to only charge what you can pay off each month.

Next time we’ll look at how the amount you owe affects your credit score.

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