What determines your interest rate on a home loan? Your credit score! When you apply for a loan, the lender runs your credit report and receives your payment history summarized as a number, called a FICO score. Each of the 3 major credit bureaus rate you according to your FICO score, between 300 to 850. The higher your FICO score, the better your loan terms (such as lower interest rate). The FICO score is comprised of: Payment history (35%) Amounts owed (30%) Length of credit history (15%) New credit (10%) Type of credit in use (10%) Your credit score depends on many factors, such as: number of credit accounts, dollar amounts of debts, total amount of debt, record of on-time payments, credit inquiries, account charge-offs, and public records such as judgments and bankruptcies. Before yo...
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