Home Loan Guide - Knowing Your Credit
Knowing your credit is just as important as your income and the amount of equity you have to put toward your home or already in your home if you wish to withdraw equity. Your credit report will dictate how much money you can borrow and at what interest rate. Your credit is regularly summarized into a numeric representation of your deemed credit worthiness by using a credit score. Your credit score is then used by banks and lenders to decide whether or not you are creditworthy. If they determine that you are creditworthy, they will use your credit score as well to figure how much and at what interest rate they will lend you the money.
Your credit score is based on your credit reports and is calculated by averaging the information on your credit report against millions of other credit reports. The main factors that determine your credit score are: your previous payment conduct (less late payments is better), your current debt (lower is better), the duration you have used credit (longer is better), and whether you are pursuing credit or not (fewer recent credit applications is better). A credit score can range from 375 to 900, where 900 being the best. A credit score of 650 or higher is considered excellent by most lenders although not every one of them may agree.
It is vital that you understand your credit before you apply for a loan. If your credit is great (a score above 650) then you can expect to get very competitive interest rates. The lenders may even offer you loans that are higher than what you requested. However, if you have bad credit, you should not be discouraged. There are plenty of lenders that will give you a loan although these loans will regularly be for higher interest rates and/or lower loan amounts. Understanding your credit is essential so that you can set your loan expectations precisely.
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