Credit history is an important factor when applying for a mortgage. This report not only shows the quality and amount of your past payments, but it also provides information to lenders about your debt/income ratio. However, negative items on your credit report can prevent you from qualifying for a mortgage. A home loan is only possible if you have at least two consecutive years of good credit. Negative entries such as late payments, vehicle repossessions, and home foreclosures remain on your credit report for seven years, regardless of whether or not you've paid the balance on the account.
Average age of accounts
The Average Age of Accounts (AAoA), is an important factor in determining your eligibility for mortgage financing. If your average age of accounts is too high, your application may be denied. Because your AAoA is affected by how many accounts are open, it could be denied. It is possible to lower your AOA by closing old accounts and establishing new ones.
Your AAoA will be based on the oldest credit accounts and the newest. Your score will decrease the older your oldest credit account. To determine your AAoA, review your credit report. This list shows all the accounts you have open and when they were opened. You can calculate your average age of accounts by taking the average of the two oldest accounts and dividing it by the number of open accounts.
VantageScore
Your credit score is dependent on several factors including your payment history as well as your age. Your credit history is also important. The longer your credit history is, then the better. Credit responsibly can help raise your score. Lenders prefer people with longer credit history, and VantageScore emphasizes this fact.
You must pay all bills on time to improve your credit score. If you find yourself unable to make your monthly payments on time, try setting up reminders or automatic payments to ensure that you don't miss a payment. Notify your lender immediately if you know that you will miss a payment. If you notify your lender in advance, many lenders will not report missed payments to credit bureaus.
FICO(r)
A FICO(r) score is a numerical rating of a borrower's creditworthiness. The score is calculated using a credit report obtained from the three largest consumer credit bureaus. The score is based on the borrower’s payment history as well as the total amount of unpaid credit. The FICO(r), score, is an important factor in determining whether a borrower is eligible for a mortgage.
FICO scores are now required for mortgages by banks. VantageScore may be a rival to FICO. It can be used similarly, but investors are more likely to use it for consumer packaged loans. It is also used to securitize loans by lenders.
VantageScore requires a minimum of one month of credit history in order to be approved for a FICO(r).
You should check your credit score first when looking for a mortgage. It is difficult to get approved for a loan if you have a low credit score. There are two credit scoring systems you can use to check your score: the FICO and VantageScore. FICO is the standard score. It is the one you most likely will use. VantageScore is a brand new system that has been promoted by three credit reporting agencies.
VantageScore uses credit information to calculate a three-digit credit rating ranging between 350 and 800. VantageScore scores can be calculated even if there is only a month credit history. However, it is important to note that you must have at least one month of credit history to qualify for securing a loan with a FICO(r) score.
No credit history required for mortgage application
Even if you haven't had a lot of credit history you can still be approved to mortgage loans. If you have bad credit you could have missed several payments or taken too much on your debt. Insolvency and foreclosures can leave a bad mark on your credit rating. While it's more difficult to get a mortgage with bad credit than with no credit, it's still possible.
First, lenders will need to verify that you can pay the upfront cost and make the monthly mortgage payments. Lenders will be more likely to approve you if you have some credit. To build your credit score, you will need to have a credit history.