What Factors Determine Your Credit Score?

Credit scores…we know what they are, but very few people in NJ know HOW they arrive at the credit score that they have. What is this mysterious formula that is used in calculating your credit score? After all, you need a good credit score to buy homes in NJ for sale, right? How about refinancing your New Jersey mortgage? Virtually everything you buy for a large sum of money, can fit into the credit system. So since we know what a credit score is, and why it is important, let’s look at some factors that truly determine what your score will be. then, you will have a better manager on managing, and improving, your credit for the future.

There are really only 5 major things (factors), that go into determing what your credit score will be, and helping you qualify for a great interest rate on an NJ mortgage loan. I am going to list them now, one by one:

1) Payment History – Payment History accounts for about 35% of your total credit score. Remember, in order to get a great interest rate on an NJ mortgage loan, you need a good credit score. Remember that paying your debts ON TIME, will consequence in a greatly improved chance of New Jersey mortgage loan approval in the future. Someone who rarely ever misses a payment is likely to not default on a loan in the future.

2) How Much Money Do You Currently Owe? – This accounts for about 30% of your score. Basically put, how much debt you have, other than the NJ mortgage loan that you are applying for. Not having a slew of other accounts and high payments can do wonders for you, as the less debt you have, the less likely you are to default on any new accounts.

3) How Long is Your Credit History? – This one accounts for about 15% total. Simply put, if you have had credit of any kind for a long time, or have proven that you were a good payor in the past, you’re pretty much golden. New Jersey mortgage lenders love somebody who is experienced at paying debt over a period of time.

4) Last Application for Credit – This accounts for only 10% of your overall scores. As long as you have not opened any new lines of credit within 90 days of applying for an NJ mortgage loan, you are pretty much okay. Lenders generally don’t like to like to a borrower who is “credit hungry”, that is, anyone they consider to be trying to build up too much credit too rapidly.

5) What kind of Credit Do You Currently Have? – Here is the final 10%. Are they Installment Lonas, or revolving Loans? An example of an installment loan is a mortgage or car loan, and revolving loans are credit cards and such. Installment loans that were successfully paid off, are generally a more trustworthy sign in the eyes of a Loan Officer in NJ.

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