Knowledge: Credit Score

What is a Credit Score?

A credit score, or a FICO® score, is a summary of the history of your spending.
The choices you make and the awareness of how you spend your money will either open or close your options.  Knowing how to demonstrate that you can responsibly control your money will improve your score which, in turn, opens up your options.

Your credit score can range from 300 (lowest) to 850 (highest).  A higher score will increase a lender’s confidence that you will pay your mortgage on time and in full.  If your credit score is high, your monthly interest rate will be lower.  If your credit score is low, your monthly interest rate will be higher.

How does my credit score impact my financial freedom?

When you have a low credit score it becomes more of a challenge to obtain financial freedom due to the increased cost of interest accrued on money borrowed.

In today’s age, credit scores are no longer reserved for debt decisions and credit cards.  They are also used by lenders, insurance companies, employers, utility companies, and landlords.  Because your credit score can be used in so many aspects of life, it is important to keep it as high as possible.

Remember that your credit score is an objective view of your personal sense of responsibility.  Your past financial decisions may not accurately reflect your ability to finance a home today; however, this number is a lender’s main source of assurance.  It can be frustrating to accept that a number can be utilized to come to assumed conclusions which work against you in a lender’s decision to approve your loan.  It can feel as though your credit score is not only used to judge your financial responsibility, but also your character, trust and dependability.

Options Financial Residential Mortgage is determined to work with you toward reaching debt elimination – and along with it, the elimination of excess stress, worries and fear of instability.

Why do lenders care about my credit score?

Your Credit Score – and more importantly, your credit report – is a standard reflection of your past credit responsibility.  Lenders use your credit score as a way of determining your likelihood of repayment on a loan.  If you have a good credit score, lenders will presume that you are financially responsible.  If your credit score is low, lenders will believe this is due to an inability to stay financially afloat and will be less likely to approve you for a loan.

How do I find out my credit score?

You may acquire a free credit report online through This secure website will also issue your credit score for a fee.  The Options Financial Residential Mortgage team is always available to acquire and review your credit report with you.

What factors impact my credit score?

Responsibility is the number one factor impacting your credit score.  The specific calculations of your credit score break down into 5 categories:

•    Payment History – 35%
•    Amounts Owed – 30%
•    Length of Credit History – 15%
•    New Credit – 10%
•    Types of Credit Used – 10%

Although your credit score is calculated using these percentages, lenders also take into consideration individual factors such as your income, how long you have been employed at your current job, and the type of loan you are requesting.

Having more than one type of credit in good standing will positively affect your credit score and provide evidence to a lender that you are financially responsible.

Types of Credit:

•    Revolving
•    Installment
•    Mortgage
•    Vehicle
•    Student Loan

How do I recover from a bad credit score?

The biggest factor in recovering from a bad credit score is time. Negative history on your credit report due to any of life’s circumstances should be thought of as a setback – not an end all.  We recommend the use of professional guidance to provide you with the clarity, accuracy, and effectiveness you need in order to financially recover.  With patience and preparation, you can restore your credit and increase future opportunities.

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