Credit score for buying a home

You’ve heard a lot of chatter about the fact that it’s a great time to purchase a new home – inventory in plentiful, rates are fantastic, and prices of new homes are

even better!  But are you aware that your credit score contributes greatly to the interest rate you will receive on your new home? Today’s low interest rates are available to individuals with good credit scores.  But, what constitutes a good score and why is it so important?  Your credit score tells a lender a great deal about who you are and it’s your right to know what your credit score says about you. Finding out this information is easy, doesn’t cost a lot, and takes only minutes to do.

So what is credit scoring? Simply put, credit scoring is a method of assessing the credit risk of a loan applicant. It uses mathematical models to evaluate a person’s credit worthiness based on their credit history and current credit accounts. The system was first developed in the 1950s, but has come into widespread use in just the last couple of decades.

In the early 1980s, the three major credit bureaus (Experian, Equifax and Trans Union) each developed scoring models that allowed them to offer a score based solely on the data of one individual. Creditors, especially those in the home mortgage industry, frequently use these scores when deciding who gets a loan and at what rate. However, it’s worth remembering that creditors also consider other information, such as your salary or employment history, when making loan decisions.

What’s in a score? Credit scores are reported as a number, usually in the 300 to 900 range. The higher the number, the better the score. Creditors see the number as an indicator that an individual will repay a loan. Typically, scores are determined by reviewing the following data:

•   Your history of late payments

•   Non-payments

•   Current level of debt

•   Types of credit accounts

•   Length of credit history

•   Number of credit inquiries

•   History of applying for credit

•   Bad credit behavior, such as writing bad checks

Personal details such as race, gender and religion are definitely not considered when determining your score. It’s also worth noting that each major credit bureau has its own method for calculating credit scores. However, the scoring models have been fairly well standardized so that a “600″ score at one bureau is roughly the equivalent to the same score at another.

What’s a good score? Overall, a score of 650 or above is a sign of good credit. People with scores of 650 or higher will, all things considered, have a good chance of obtaining quality loans at the best interest rates.

Scores of 620 to 650 indicate good credit, but also may point to potential trouble areas that creditors will want to look at and review. A lender may require additional documentation before a loan will be approved.

With scores of below 620, consumers may still obtain a loan but the process may be lengthier and more involved.  All the more reason to work with an approved locally owned lending company who can work one on one with individual homebuyers.

Find out how you score in seconds! Plus, get personalized tips and analysis that can help you improve your credit rating.

General information included in this article was obtained from NewHomeGuide.com and ConsumerInfo.com. For a individual consultation on how to finance your new Colorado Springs home, visit any Campbell Homes sales office or contact Donni Feldman (Peoples Mortgage) at 719-548-5140 to set a personal evaluation of your situation and options.

Campbell Homes are available in Colorado Springs’ finest neighborhoods with the best Colorado Springs Schools.  Campbell Homes are close to work, school and play with easy commutes to Peterson Air Force Base, Schriever Air Force Base, and the United States Air Force Academy.  Our models are open daily to 5 p.m. or you can visit our online sales center 24/7 at www.CampbellHomes.com.