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Credit Scores

Credit Scores - Know Yours

Your credit scores affect whether you will get approved for credit and what interest rate you will pay for credit cards, auto loans, mortgages, etc. The higher scores mean you are more likely to be approved and pay a lower interest rate. Good credit scores are a vital part of your financial health.

Fair Isaac Corporation developed the FICO scoring system. Unfortunately, the free credit scores offered over the internet are not the FICO score which most lenders use to determine how credit worthy you are. If you are serious about buying a home, know what your credit score is to be informed of how this score will affect your ability to finance a home and at what cost.

What is a Good Score?
Credit scores range from 300 to 800. Most lenders consider FICO credit scores above 700 to be very good and a sign of good financial health. A score below 600 indicates a high risk to lenders and therefore they could charge you a much higher rate or even turn down your credit application.

How are FICO scores assessed?
Here is how these scores are calculated from your credit report:

  • Your payment history is about 35% of your FICO score. Have you paid your credit accounts on time? Late payments, bankruptcies, and other negative items can hurt your credit score. On-time payments help your score.
  • How much you own is about 30% of your FICO score. FICO scores look at the amount you owe on all your credit accounts.
  • The length of your credit history is about 15% of your FICO score. Generally, the longer you’ve had a credit history, the higher your score, because there is more of a track record to look at. Of course, it’s better if you’ve always made payments on time.
  • New credit is about 10% of a FICO score. This includes efforts to obtain loans or credit lines in the past few months. Remember: if you have too many people making credit inquiries about you, that could indicate that you’re in financial trouble or perhaps buying many high-ticket items.
  • The type of credit you use is about 10% of a FICO score. This includes installment loans, leases, mortgages, credit cards, etc. Mortgages are considered “better” then credit card debt.

How to Improve Your FICO Score

  • Paying your bills on time is an absolute must. Delinquent payments and collections can really hurt your score.
  • Keep balances low on credit cards. High debt levels can hurt your score.
  • Apply for and obtain new credit accounts only when you need them.
  • Pay off debt rather than moving it between credit cards.
  • If you have missed payments, get current and stay current. The longer you pay your bills on time, the better your score.
  • If you have limited credit, obtain additional credit. Not having sufficient credit can also negatively impact your score.
 
 
 

Latest from the Blog

  • Pending Sales for Massachusetts Homebuyers Maintain Steady Year-Over-Year Increases for Almost Four Years This February

    WALTHAM, Mass. – March 14, 2017 – The Massachusetts Association of Realtors® (MAR) reported today that ongoing buyer demand pushed pending sales up three percent over last year. Pending sales have been up 47 of the last 48 months, marking almost four years of positive gains in single family homes put under agreement. Realtors® confidence both in the market and in home prices was positive in February. 

     February Pending Sales:  

    Single Family February 2017 February 2016 % Change
    Sales 3,967 3,852 3.0%
    Median Price $330,000 $309,000 6.8%
    • Pending sales have been up 47 of the last 48 months  
    Condominium February 2017 February 2016 % Change
    Sales 1,558 1,566 -0.5%
    Median Price $313,000 $290,000 7.9%
    • Pending sales have been up or flat 17 of the last 18 months  

    “Buyers have been tireless these past four years, showing that the desire to live and work in Massachusetts is strong despite dwindling inventory and rising prices,” said 2017 MAR President Paul Yorkis, president of Patriot Real Estate in Medway.  

     Realtor® Market and Price Confidence Indexes:  

    Confidence Index February 2017 February 2016 %Change
    Market 75.20 68.66 10%
    Price 77.00 75.70 2%
    • The Realtor® Market Confidence Index was up for the 11th straight month
    • Measured on a 100-point scale, a score of 50 is the midpoint between a “strong” (100 points) and a “weak” (0 points) market condition  

    “This is the highest recording Market Confidence Index for the month of February since we began recording the data in 2008,” said Yorkis. “This speaks to the strength of the market this past year, as well as looking ahead to the spring market of 2017."