How To Buy A Home With Bad Credit

There is quite a financial difference in the thousands between paying a monthly loan based on a bad credit score and an excellent one.

A credit score reflects your creditworthiness based on an analysis of your credit information provided by the three credit bureaus, resulting in your credit report.

Various people may ask for your credit report and credit score. They are lenders, landlords, employers, cable companies, utility providers or even to obtain a smartphone, a prospective business or life partner. Your creditworthiness reflects your attitude on your finances and paying your bills on time.

Generally, there is no stated specific minimum credit score that all lenders will universally accept you and give you a loan. The lower your credit score, the higher the risk for the lenders to view you as a borrower. They may lend you money, but you will be paying a higher monthly loan amount. Others may pass on giving you a loan.

Payment History  (35%) Payment history accounts for 35% of your credit score. It carries the most significant weight in your score. This is one area in which you have considerable control. Lenders want to know if you have paid past credit accounts on time.

Amounts Owed  (30%) Amounts owed reflects on your credit utilization. Lenders do not want you to use a significant amount of your available. A significant influence on your credit score, credit utilization is the ratio of your total outstanding revolving credit balances divided by full available credit.

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Length of Credit History (15%) How you handle credit is essential to lenders. The length of time of your oldest credit account and the average age of all of your accounts determine your credit history.

Credit Mix  (10%) Lenders favor some variety of borrowing in your mix of credit. A borrower handling different kinds of debt products may reflect less risk to lenders.

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New Credit (10%) When you apply for new credit, a creditor will review your credit file to assess how much risk you pose as a borrower. As such, it results in a “hard” inquiry on your credit report for up to two years. Hard inquiries can negatively impact your credit score, particularly if you are making multiple inquiries.

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