While there are other scoring systems for purchasing a car, or your insurance rates, the one score used in real estate that will determine your interest rate is the FICO score. In the loan making days where the ability to fog a mirror may have earned a 680 score qualifying for the best rates, optimal pricing now needs 720 plus. An increment of a few points shy of that number can cost you thousands in interest fees over the course of your loan and limit how much you can borrow- and how much house you can afford.
So what is your credit score now, and what effects your score? Federal law gives you access to your credit report once every 12 months at www.annualcreditreport.com. This will allow you to see what is being reported to the three main credit bureaus, but will not give you your score which you can access for a fee at MyFico.
Five Determining Factors for your FICO
1) 35% is based on your payment history for all accounts.
2) 30% is based on the amount you owe on revolving accounts (includes same as cash offers).
3) 15% is based on how long you have been using credit.
4) 10% is based on your applications for new credit
5) 10% is based on types on credit used (mix of credit).
A good place to start is to look at your free credit report yearly and clear up any errors on the report.
How can FICO scores be improved?
Keep payments current and avoid late payments, especially 30 days late. Keep credit card debt below 30% of the credit limit. Limit applications for new revolving debt- credit cards, department stores, etc., especially if you are considering a home purchase in the near future.
(Source: FICO)