Your Credit Range
Mortgage lenders don't just look at your income; they closely scrutinize your financial reputation to determine the risk of your loan. To a lender, your credit history is a crystal ball that predicts how likely you are to pay them back.
What Lenders Look At?
Lenders primarily focus on two specific documents:
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Your Credit Report: A detailed "financial resume" showing every loan you’ve taken, your payment history, and any legal filings like bankruptcies.
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Your Credit Score (FICO): A single numerical grade (typically ranging from 300 to 850) that summarizes your creditworthiness.
The 4 Pillars of Your Credit Score
Why is your score what it is? Lenders weigh these factors most heavily:
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Payment History: Have you been late? Recent 30-day delinquencies within the last 12 months are red flags for lenders.
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Credit History Length: The longer you’ve successfully managed credit, the more reliable you appear.
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Credit Utilization: Being "maxed out" on your cards suggests you are financially stretched, making you a higher risk.
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Credit Mix: A healthy blend of "revolving" debt (credit cards) and "installment" debt (car loans) shows you can handle different types of financial responsibility.
Cleaning Up Your Report Before You Apply
Did you know that roughly 80% of credit reports contain errors? You should check your report months before talking to a lender so you have time to fix mistakes.
Pro-Tip: Your Pre-Application Checklist
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Verify Account Numbers: Ensure every account listed actually belongs to you.
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Scan for Errors: Look for "late payments" that you actually paid on time and dispute them.
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Explain the Blips: Be ready to provide a "Letter of Explanation" for any past financial hardships.
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Reduce Balances: Lowering your credit card balances right before applying can give your score a quick "bump."