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December 30, 2022

Credit – Unlock the Keys to Credit

Types of Credit and Credit Scores

Everyone who uses credit cards and other money borrowing avenues generate a credit score, but what does that mean when trying to borrow money to purchase a house? Your credit score will impact what loan option is available to you and in this video I break down a bunch of information to understand aspects of your credit score.

Four Basic Credit Types Used for Determining a Loan or Line of Credit

There are four basic ranges of credit scores that are accessed for pulling out loans for Mortgages, Auto Loans, Personal Loans, and Credit Cards or other lines. Below are the credit ranges for those lending options:

300-850 – Mortgage

250-900 – Auto

250-900 – Bank

300-850 – VantageScore

What Impacts Your Credit the Most

   Payment History

     The biggest influence on your credit is the payment history of credit cards that you own. Credit Cards are an open line of unsecured credit with no guarantee to the lender (credit card company) on what you use your line for. Since this is the most risky option to loan out money, your score takes the biggest positive or negative hit based on how consistently you pay your credit card obligations on time. 

   Utilization 

     Credit utilization is the current amount of money you have borrowed at a given time. Credit utilization impacts your credit second most after payment history. If you use a large percentage of your available it can lower your score and imply that you do not make enough income to cover your living expenses. The Ability To Repay is the KEY to borrowing money, and if anything in your financials shows that you may have difficulty paying back a loan, you may be viewed as a risky borrower. Keeping your current credit usage below 10% shows that you are a great borrower and can handle your financials well. 30% usage may be a fair amount and lower your score a bit, but by all means, do all you can to keep your score under 50%. Any time your credit utilization exceeds 50%, your credit score will experience a significant negative impact. The more money you have to pay back on a monthly occurrence, means you have a larger monthly Debt-to-Income ratio, and adding more debt obligations each month makes you risky to lend to.

   Credit History

     Credit history refers to how many late payments you have had over the course of 1-2 years, we call these 30/60/90’s. One 30 day late payment won’t impact your score much if it’s been over one year since that payment was missed, but if it’s less than 12 months, your credit score will have a bad hit against it.

     Any time you have a 60 or 90 day late payment in two years or less, your score will drop significantly. It takes a minimum of two years for these late payment to fall off whereas it takes a minimum of one year for a 30 day late payment to fall off of your credit history. There are credit repair professionals that can help, but since Credit History is the 3rd highest impact to your credit score, make sure you keep your payments up to date. Communicating with your credit agency can also help. I personally have missed payments in the past, and a short phone call to my credit line company gave enough value to my creditor that they removed the late payment note, which saved my credit from taking a hit. Creditors want to lend out money because they get a return on their investment that they place in you. If you can show yourself as a reliable investment, chances are, that creditor will want to invest in you more.

An Example Credit Impacting a Home Purchase Loan

   Fast forward to the 4:00 mark to watch how your credit score can influence one loan example. I examined how the upper five breaking points of credit scores changed one loan option.

Remember that the higher credit score you have, the more free you are to shop around for credit without having an impact on borrowing money. More importantly, if you are looking to buy a house, talk to your mortgage broker as they can easily look into what mortgage options may be available to you based on your personal mortgage score. 

Whatever your situation, there’s a Juicy Solution waiting for you. Take a peak around the website for more helpful tips and give me a call if you’d like to know where to start.

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Funding Juicy Solutions LLC

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email: info@fjsolutionsllc.com

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Bethany Poppele, from Engel & Volkers, organized a great Mill Dog Rescue Event at University Village in Colorado Springs on December 17th, 2022. Several dogs found new homes that Saturday, and everyone who came had a great time. It was a pleasure being a part of this adoption outreach and make a difference in the lives of both abandoned dogs and healthy families looking for new pets. Next time you consider buying a dog, lookup National Mill Dog Rescue and see what furry friends may bring the warm love to your home that you are looking for, while at the same time save a four legged life.