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Credit scores and reports can be confusing, but if you want to take out a loan for a house or car one day, you need to understand what they are and why they’re important. We take a look at what you need to know about your credit score and report.

What Are Credit Scores and Credit Reports?

A FICO credit score is a number that ranges from 300 – 850 and is used to indicate your creditworthiness. Lenders look at your score as an indication of your ability to repay your debts.

A credit report is a detailed overview of your credit history. It includes all your credit accounts, credit cards, loans, credit limits, account balances and payment history.

Knowing both your credit score and what’s on your credit report is essential, because without your report, you don’t know what factors influenced your score. Your report will give an overview of what you’re doing right and areas where you can change your behavior to increase your score.

Factors Affecting Your Credit Score

Your credit score is determined by many different factors:

  • The type of credit you have. For example, student loans, car loans, and your mortgage as well as store credit cards.
  • Credit utilization. This is how much credit you’re actually using. Using too much of your available credit will increase your score.
  • Late payment history. Late payments negatively impact your score the most in the first two years, but they will stay on your report for seven.
  • A study by the FTC found that one in five consumers had an error on their credit report that could be corrected by a credit reporting agency. Twenty percent of the consumers who found errors experienced an increase in their credit score once the error was removed.

Make sure your report is up to date before you go to a lender for an auto or home loan; you don’t want to be denied for a mortgage over an error that could have been prevented. If you do find a mistake, file a dispute with the creditor and the credit bureau to get it fixed immediately.

Why They Are Important

Your credit score is important for a few reasons. First, it influences your chances of getting approved for a loan or credit card. This is particularly important if you want to purchase a home in the future because your score will influence your mortgage eligibility.

Your score also influences your interest rate; the higher your credit score, the lower your interest rate will be and vice versa. Because your score is supposed to show your ability to repay your debts, lenders want to ensure you’re going to pay them back in full, so they might give you a higher interest rate or deny you altogether if your score isn’t high enough. This can cost you a lot in the long run and might even mean you’ll have to rent instead of purchase.

Take Action

Getting your credit score and not your report is similar to getting a test grade in school without getting the actual test back. How can you know what you did wrong and what you did right without the actual test? Credit scores and reports work in the same way. You won’t know what has influenced your score if you haven’t seen your report. Use a site like QLCredit.com to obtain your score free of charge and to view your report. Once you have this information, you can determine what’s impacted your score so you can take steps to improve or maintain it.

Do you have any questions about your credit score? Post in the comments!

 

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This Post Has 22 Comments

  1. I am a DIVORCED MOTHER, I’M DISABLED, TRYING TO RAISE A GRANDDAUGHTER, SHE’S 10YRS OLD, I’M HAVING TO TRY AND STAY IN A SMALL CAMPER ON SOME FRIENDS PROPERTY, WE NEED A HOME SO BAD,

    1. Hi Johnnie:

      I’m going to recommend you speak with one of our Home Loan Experts at (888) 980-6716. They can help you thoroughly go over your situation and look into all of your options. If we can’t help you at this point, we may be able to come up with a game plan to get you where you need to be to get into a home as soon as its practical for you. I wish you luck!

  2. I need to come up with a mortgage to buy my grandfather’s house. And I need to do it asap before it has to be sold as part of the estate. One problem is my credit score is 536, anyone have any ideas. The house is worth $150,000.

    1. Hi Sean:

      Your mortgage options are going to be really limited. It’s possible to get an FHA loan from other lenders with a credit score as low as 500, but you need a 10% down payment and the rates will be higher because it’s considered a riskier loan. That’s really your only option at the moment.

      If you want an FHA loan from us, you need to have a minimum median FICO score of 580. There are a couple of resources I can try to give you. We have this blog post that has some great general credit tips. Additionally, I recommend you check out our friends at QLCredit. You can get your free VantageScore 3.0 credit score and report from TransUnion every two weeks. You’ll also get personalized tips on how you can improve based on the information in your report.

      Once you get your credit score up, we can work with you at (888) 980-6716.

  3. I am really tired of paying high interest rates on everything. If everyone could have the same opportunities to buy their own home at a reasonable rate, than one wouldn’t have to pay large rental rates that are higher than the same property mortgage rate. There are ma2out there who are willing to buy their own home, But are faced with a lot of errors on their credit reports. I am in the process on getting my credit score increased so that I can have the opportunity to buy my own home.

    1. Hi Betty:

      Getting your credit in order is the right thing to do. I’m going to have someone reach out to you as I see you’re working with us. Thanks!

  4. Hi my name is Danielle Hadden I am try to get my credit score fix can someone please tell me what should I do for it how can I get it to experience

    1. Hi Danielle:

      Thanks for reaching out! I have three recommendations for you. First, you need to figure out what’s on your credit report if you don’t already know to know what you’re up against. I recommend you check out our friends at QLCredit. You can get your free VantageScore 3.0 credit report and score from TransUnion every two weeks without affecting your score. The other nice thing about this is you’ll get tips on how you can improve your score based on the information in the report itself. Second, this blog post has lots of great general tips. Finally, once you’ve looked at these resources, you could talk to one of our Home Loan Experts to come up with a game plan that gets you across the finish line. You can get in touch with them at (888) 980-6716. Hope this helps!

      Thanks,
      Kevin

  5. I am shopping an equity recapture loan to do some Remodeling on a 300K house that I owe 39k and want 22k for remodeling. I have an 830 credit score, but not for long, because everyone I talk to wants to run a credit report just to talk to me about rates on their seemingly not-so-great lending, let alone who-knows-what loan service quality and integrity. So with those hits on my credit info, who knows what my stellar credit rating will fall too.

    I am so frustrated.
    Do I really need to call a Realtor to get personal referrals to mortgage brokers so I can get prequalified to get the lending rate information and terms options!?!? That was nice when I bought my 2nd home as he offered me an option for which I was unaware. However, I was thinking that the world of lending has changed since 1997, and shopping on the net should should be a cost and time effective approach.

    I am so frustrated with this “shopping” experience.

    So far I see Capital One will give me a 4+% spread over prime on rates, with no lock, and thats on Variable, and that with an instant credit score hit!

    Somehow I think I should be able to do better, is it that I spoke to a commissioned agent that is steering me in HIS best intetest, not mine?

    What say you, and what will it cost me tangibly and in tangibly in both fees and credit report hits just for you to tell me your rates. By the way, it would be nice if you could represent your quality of loan service, or someone who rates yours. After all, my loan and debt payment history is stellar, and I would hope to not be jacked with erroneous escrow service and analysis, poor loan processing cycle times, untrained account reps, etc. So please be able to definitively and quantitatively answer why I want your operation over others.

    Have a great day or evening.

    1. Good morning. There are a lot of really good questions here so I’m going to try to take these in order.

      You might be best served by a cash-out refinance. It sounds like the other lender is offering you a home equity line of credit. We don’t do these. As you’ve noted, they have variable rates. With a cash-out refinance, you can choose a fixed or adjustable rate and you would get a lower rate than if you were to take out a home equity line which is a second mortgage as opposed to your primary.

      It sounds like you’ve taken really good care of your credit and I fully understand your concerns about credit pulls. I’m going to be upfront with you about this. Any lender will have to pull your credit in order to give you rates. This is because your rate is based on a variety of factors including your credit score and debt-to-income (DTI) ratio which come directly from pulling your credit report. That being said, you’re shopping around right now. If you make multiple inquiries about one type of loan like a mortgage, FICO builds in a 30-day window where any credit pulls only count as one when it comes to the actual scoring. Also, if you do the right things like pay your bills on time, this small impact of the credit pull should go away in a relatively short time frame.

      Your next question was why you should go with us. We’ve been ranked highest in customer satisfaction for primary mortgage origination by J.D. Power for the last seven consecutive years. Each of the last three years, we’ve earned in the highest ranking from J.D. Power for mortgage servicing. If you call us, our servicing team is all based right here in Detroit. We believe in taking care of every client, every time like we would take care of our own family. We have Rocket Mortgage. If you choose, you can complete your entire refinance online or get help from one of our licensed Home Loan Experts from the very beginning or at any point along the way. It’s all about you and how you feel most comfortable.

      Hopefully, this has helped put you a little more at ease. If you like, you can get started with Rocket Mortgage. If you would feel more comfortable with a personal touch, one of our Home Loan Experts would be happy to take your call at (888) 980-6716. Have a great day!

      Thanks,
      Kevin Graham

    1. Hey Donnie:

      We need a little more information about what you’re trying to do in order to give you the answers you need. I’m going to reach out with an email.

      Thanks,
      Kevin Graham

  6. Wanting to buy, but my credit score is like 590/600..and without a massive morgage payment and want a fixed loan.. I know that’s not good, what if any are my choices?

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