If you are a homebuyer looking for Eugene real estate or Springfield real estate one of the single most important factors that decide if you can buy that new home is credit score.  When a lender considers giving you credit for a car, boat, credit card, or a house they want to quantify the amount of risk they are taking that you may not pay it back. So as a consumer you need to understand the importance of this number and have a strategy to cultivate a great score as well as keep it once you have one.  
The credit score is the culmination of several aspects of your credit history that when put together offer a lender a quick reference as to the “health” of your financial well being.  You will often hear people refer to this score as a “FICO” score.  That is because it is the most common score used by lenders and is created by software designed by the Fair Isaac Corporation.  Nearly all lenders you talk to when shopping for homes for sale in Eugene and Springfield Oregon real estate use this score and will refer to it.
FICO scores, which range from 300 – 850, consider many factors which include payment history, amounts owed, length of credit history, credit you have recently obtained, and the composition of credit you have available to you.  Each of these is important, but weighted differently.  The higher the score the better.
Your payment history and amounts owed make up approximately 2/3 of your score.  It goes without saying that is very, very important that you never pay a bill late.  However, you probably don’t realize that almost equally as important is that the amount you owe, in my opinion, is never more than 35% of what you have available to borrow.  So if all of your credit cards and other lines of available credit equal $10,000 you never want your balances to be above $3,500.
Credit history you can do less about.  However, if you are just beginning to build or rebuild your credit start right away.  Also, if you have children teach them responsible finance and prepare them to get a credit card once they turn 18.  As long as they are responsible and follow the rules they will have a head start when they are ready to buy a home.  The older your credit lines are the better.  For example, a person with a credit card they have successfully managed for a decade will be a better risk than a person who got one yesterday and hasn’t proved their credit worthiness with it yet.
New credit is weighted about equal with credit history and types of credit in importance with the total of all of these being 1/3 of your score.  New credit means things you are applying for, or have received recently.  If you apply too much the credit score is weakened because it doesn’t know if you are a savvy shopper trying to get the best deal or someone who is desperate and trying to borrow money from anyone willing to give it.  Note that when you buy a home, at least homes for sale in Springfield or Eugene , you can get multiple quotes from home loan lenders in a thirty day period without the multiple credit inquiries affecting you.  Be sure to ask before you do this to be sure.
Types of credit is simply describing the mix of the kinds of credit you have available.  Do you have a healthy mix of major credit cards, some department stores, a car loan, and a mortgage line?  Or do you have numerous unsecured lines of credit or dozens of the same kinds of credit cards?  One things I’ve noticed that hurt my score was having a line of credit from GE Capital that I had used once many years ago, but when I checked my credit it was a suggestion from the credit bureau that it was hurting my score.
IMPORTANT: The one misnomer people have is that they should cut up credit cards and cancel them.  NEVER do this without considering that if you cancel cards you have had a long time you are not only lowering your available credit, remember the 35% rule, AND getting rid of old debt lines to replace with new will hurt your credit history as well.  So think before you do this.
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Joe Williams, Principal Broker / 541-915-2080       Sean Pearson, Real Estate Broker / 541-337-3059

Author - Joe Williams