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Credit PT 1: Factors affecting your credit score

This begins credit month at UNMB Home Loans Inc.  Our five part weekly series, Credit: How It Affects Your Home Loan Rate – Everything You Need To Know.  

Have you ever wondered what your credit score is? Or, do you have a pretty good idea of what your score is, but have no idea how to improve it? Or maybe you know what your score is, as well as the basics of improving it, but have no idea how the score is actually calculated?

Your credit report and credit score play a large role in the loan programs for which you qualify and the corresponding interest rate you receive.  This series of articles will help you understand your credit…a well-known, yet mysterious topic and provide you with tools as well as solutions you need to move forward now or chart your course for a future home purchase.


Factors Affecting Your Credit Score

poor credit score can potentially cost you tens of thousands of dollars over the term of your loan.  Your credit report is a track record of your payment history.  It is a cumulative number that measures your success relative to others.  What is a FICO score? It’s a three-digit number that lenders and credit card issuers use to predict how likely you are to repay them. The score is also used to assist in setting the interest rate you’ll pay.  The Fair Isaac Corp. introduced FICO scores more than 25 years ago, and they are the most widely known credit score.


FICO uses a proprietary formula to gauge your creditworthiness. The formula is applied to data in your credit reports at credit reporting agencies Equifax, Experian and Trans Union. The credit bureaus have slightly different data from one another, so your score may vary for each bureau. FICO scores range from 300 to 850. On the FICO scale, the higher the number, the better your score since there is less perceived risk to your lender.


The credit tiers generally look like this:


Credit RatingCredit Score
BadBelow 600



FICO doesn’t reveal exactly how scores are calculated.  However, they do provide guidelines about what factors:

Payment history (35% of your score)

  • This concerns whether you’ve paid on time. Late payments can ding your score. Thirty days late isn’t as bad as 60 and so on.  Bankruptcy or accounts in collections will also hurt your score.

Amount of debt relative to credit limits (30%) 

  • This is how much of your available credit you are using — the less, the better for your score.

Age of credit (15%)

  • This refers to how long you’ve had credit and the average age of your credit accounts. Longstanding and stable credit adds value to your score.

Recent applications for credit (10%)

  • A “hard inquiry” when you apply for new credit can ding your score for up to six months.

Whether you have more than one type of credit (10%)

  • Having both installment loans (those with level payments, like a car loan or mortgage) and revolving credit (like a credit card) can help your score.


United Northern Mortgage Bankers, Limited has been trusted for over 39 years to help our customers with their home financing needs. We are happy, at your request, to run your credit report and provide you with a free credit analysis free of charge.  This and other benefits are available as part of credit month at UNMB Home Loans Inc.