What Are Credit Scores And Why Are They Important?

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Person checking credit score on their phone for home mortgage

What Are Credit Scores And Why Are They Important?

Looking at homes for sale in Bucks County, PA, but wondering if you are eligible to obtain a mortgage on your dream home? Your credit history and credit score play a crucial role in whether or not you can buy the home you want and how much your home will end up costing overall.

What is Your Credit Score?

Your credit score is an assessment of the likelihood that you will repay the bank or other entity that loans you money or extends credit to you. It is a number that ranges from 300 to 850, with 300 being very poor and 850 being exceptional. Your score is calculated based on:

  • Your history of payments. If you make late payments, then points are deducted from your score.
  • How much money you owe.
  • If you max out your credit availability or handle it responsibly.
  • The age of your accounts. Older accounts show that you are a good steward of your credit.
  • How often you inquire about new credit.
  • The type of credit you have been granted, such as installment loans, retail accounts, or credit card accounts.

What is Your Credit Report?

Your credit score is obtained by pulling your credit report, which is a record of the money you’ve borrowed, credit that has been extended to you, and how you performed as a borrower. This can include car loans, student loans, credit cards, and personal loans. Your credit report and credit score provide a picture of your creditworthiness and are used by mortgage lenders and others to determine the risk they take if they loan you money to buy a home.

In addition to your performance with previous and existing credit lines, your credit report contains information on bills that you didn’t pay that are now in collection, including medical and utility bills. It also lists tax liens and bankruptcies that are part of your public record. In addition, it keeps track of inquiries from other creditors, which indicates how frequently you have attempted to access credit.

Why Your Credit Score Matters

Among folks seeking mortgages, the best rates are reserved for those with the best credit. Getting just a few points shaved off your interest rate can save thousands of dollars over time (and even make your monthly payments more affordable). In addition, good credit can help you get lower premiums for home insurance, which can also reduce your monthly/annual costs as a homeowner.

Find houses for sale within your price range with the help of The Joseph Bograd Real Estate Team.

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