A Guide to Understanding Credit Scores 2024

In the universe of real estate, you may have heard a lot about credit—credit reports, credit scores, credit freezes, credit monitoring, etc. But what does that all mean for you? Your credit is something that matters because it will affect your ability to get a loan, a job, housing, insurance, and more. It is important to understand what your credit is and how to protect it.

A Guide to Understanding Credit Scores

Continue to read to find a guide to understanding credit scores in your Blossom Valley San Jose, CA real estate.

What is Credit & Why Does it Matter?

When you hear the word credit being mentioned, it is typically your credit history in question. Your credit history describes how you use money. For example:

  • How many credit cards do you have open?
  • How many loans do you have under your name?
  • Do you pay your bills on time?

How you typically handle your money and bills in the past will help lenders to decide if they want to do business with you. Your credit history will help lenders determine what interest rate to charge you.

  • If lenders see you pay your bills on time and never take on more debt than you can pay back, they will generally feel more confident doing business with you.
  • If they see you are late on your payments or owe more on credit cards or loans than you can repay, they might not trust that you will pay them back on time.

Who is Interested in Your Credit History?

Lenders, landlords, insurance companies, and potential employers are a few examples of who might look at your credit history. Your credit history will make a big difference if you attempt any of the following:Who is Interested in Your Credit History

  • Apply for a loan or credit card
  • Look for a job
  • Try to rent an apartment
  • Try to buy or lease a car
  • Try to get rental or home insurance

Because lenders, landlords, and others care about how you handle your bills and other financial decisions, you may want to care about your credit as well.

How Do You Know if Your Credit is Up to Date?

"Good" or "bad" credit is based on your credit history. You can find out what your credit history looks like by checking your credit report. You will find out by looking at your credit and what is in your credit report. So, what is in your credit report? Your credit report is a summary of your credit history. You might find information such as the following:

  • Your name, address, and SSN
  • Your credit cards
  • Your loans
  • How much money you owe
  • If you pay your bills on time or late
  • If you filed for bankruptcy

Businesses will pay the credit bureau to use that information to check your credit, as they will run a credit check before deciding to lend you money, give you a credit card, or rent you an apartment.

Bill Gassett of Maximum Real Estate Exposure often writes about numerous financial topics, including credit scores. I thought it would be great to get this expertise. Here is what Bill told me:

"Your credit scores are one of the most vital factors when getting a home loan. They can significantly influence the loan terms a lender provides. I recommend that everyone strive for a credit score above 740.

Credit scoring above 740 will get you the best mortgage and terms from most lenders. Throughout the loan, your interest rate can tremendously impact what you pay for the house. The better the rate, the less interest you will pay.

So, improving your scores can make a significant difference!

If you have marginal credit, I recommend using Credit Karma. It is a free service that will provide you with the information necessary to improve your scores quickly. Their decision engine gives precise advice when unsure what to do.

I have referred many clients to the site over the years."

What is a Credit Score?

A credit score is a number that is calculated based on the information in your credit report. It helps businesses predict how likely they are to repay a loan and make the payment when they are due. You will see plenty of different scoring systems, but most lenders use the FICO score.

To calculate your credit score, companies will pull information from your credit report, such as the following:

  • How much money you owe
  • Whether you have paid on time or late
  • How long you have had credit
  • How much new credit you have
  • Whether you have asked for new credit recently

Typically, credit scores fall between 300 and 850, with a higher score meaning you have "good" credit, businesses think you are less of a risk, meaning you are more likely to get credit or insurance or pay less for it. A low score means you have what businesses see as "bad" credit, meaning it will be harder for you to get a loan or a credit card—and you are more likely to pay higher interest rates on credit you do get.

Linda Edelwich, Glastonbury Realtor offers this insight to understanding their credit score.

"I've had some people ask if a perfect credit score is even a thing; if it's possible and technically it's not so buyers shouldn't feel stressed on getting that perfect score. Typically if you have a score over 780 you're pretty much guaranteed the best rate and terms. Anything under 500 should be worked on a bit to give yourself a better rate. Don't leave money on the table for preventable actions."

Interested in real estate in Blossom Valley San Jose, CA? Use this guide to perfect your credit so that you can venture out into the world of real estate and find your new beautiful Blossom Valley San Jose, CA house. Explore the best of Blossom Valley today. 

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