How Important Is Your Credit Score?

By Annie Hawkins

If you're financing a home, it's all about the credit score. Even if you have a great job, getting your desired rental or purchase may be challenging if you don’t have a good credit score. If you're looking to move, find out your credit score and be upfront with your broker about it — because your agent is going to find out, and if your credit needs help, it's better to know sooner rather than later in the application process.

You may have tried one of the free credit reporting sites, but they tend to give higher scores than the three credit bureaus, Equifax, Experian, and TransUnion, because they want to make you feel good. However, your score from the credit bureaus is what lenders and landlords rely on to assess your credit. Your scores from the three credit bureaus are aggregated into a FICO (Fair Issac Corporation) score. FICO pioneered a method for calculating credit scores based on information collected by credit reporting agencies.

If you want the most realistic information about your credit score, the best source is myfico.com. Going there, you will view the same information your bank will see when you are applying for a loan. Exploring myfico.com does not hurt your credit score, but you must scroll through to find whether you are using the version that applies to a mortgage or renting. You can register for a credit monitoring service there too.

How You Can Help or Hurt Your Credit Score:

It's good not to be casual about making credit card or bill payments late because even one 30-day late payment can bring your credit score down 100 points (seriously), and that late payment stays on your credit for 7 years. You can gradually increase your score by making those payments on time, but monitoring your credit is essential, especially if you're looking to rent or buy an apartment. Your payment history and score will impact your loan rate, where even a half-point higher mortgage rate will affect what you spend over 30 years.

I will share one trick I learned from a mortgage banker who told me how to increase my credit score: If you can, pay your credit card bill in full as soon as it hits your card. Pay before your actual billing date. Pay ahead of time. This sounds a little obsessive, but it worked, and I got my score up about 120 points by doing this. Yes, your credit score is very important.