If you’re buying a home, you’ll most likely need lender financing by way of a mortgage loan. Most people do! But what is “good credit,” and how does it affect your ability to buy a house?
Defining Good Credit
Credit rating agencies give you a score – your credit score – to say whether you’re trustworthy enough to repay a loan. Mortgage companies evaluate these scores to determine whether they’re willing to lend you money (especially such a large amount).
The most commonly used credit score is your FICO score.
What is a FICO Score?
FICO stands for Fair Isaac Corporation. That’s the company that introduced the first credit bureau-based credit scoring system. It hit the market in the mid-1980s, but it didn’t gain much traction until the mid-1990s, when Fannie Mae and Freddie Mac started encouraging lenders to use FICO scores.
FICO Score Breakdown
FICO scores are calculated based on your payment history, how much you owe, how old your credit history is, how much new credit you have, and types of credit you have. It’s approximately this way:
- 35% payment history
- 30% debts you owe
- 15% length of credit history
- 10% new credit you’ve obtained
- 10% the types of credit you have
Are You Buying a Home in Irvine?
If you’re thinking about buying a home in Irvine or any of the surrounding communities, we can help you find one that’s just right for your needs (and your budget).
Call us at 949-385-1684 or get in touch with us online to let us know what you’re looking for.
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