What’s in My Credit Report? | What Goes Into My Credit Score?
It can be frustrating not knowing exactly what’s in your credit report, how it shapes your score, and how such a simple number impacts something as significant as buying a home.
In this article, we’ll make it clear for you.
If you’re ready to see where you stand and how your credit score affects buying a home, explore our Digital Mortgage Pre-approval today!
What Is a Credit Score?
A credit score is a three-digit number, usually between 300 and 850, that reflects to lenders how well you manage debt. Lenders use it to assess your reliability in repaying loans. The higher your score, the better your chances of getting favorable mortgage terms.
Where Do Credit Scores Come From?
Credit scores are based on data from your credit file, which is provided by the credit reporting agencies—Experian, Equifax, and TransUnion. Credit providers use different credit scoring models including VantageScore credit scores, to assess borrower risk.
What Factors Determine Your Credit Score?
Your credit score is shaped by several key factors including:
Payment History
Payment history accounts for 35% of your credit score. Making on-time payments is critical, as just one missed payment can significantly lower your score.
Credit Utilization Ratio
Your utilization rate is how much credit you’re using compared to your total credit limit. Ideally, keep it under 30%. For example, if your credit limit is $10,000 and your credit card balance is $3,000, you're using 30% of your available credit.
Length of Credit History
The longer your credit history, the better. For example, if you’ve had a credit card for 10 years and managed it well, it enhances your credit worthiness.
Types of Credit Used
Lenders like to see a credit mix—credit cards, mortgages, auto loans, and student loans. A diverse credit profile demonstrates your ability to handle various financial responsibilities.
Recent Credit Inquiries
Every time you apply for credit, a “hard inquiry” appears on your report, which can slightly lower your score. A few inquiries are fine, but multiple inquiries in a short time might raise concerns for lenders.
What Goes on a Credit Report?
Let’s break down what you’ll find in this document.
Personal Information
This includes your name, address, Social Security number, and employment information. While it doesn’t affect your score, it’s important to ensure it's accurate because any errors could lead to:
- Delays
- Identity verification problems
- Identity theft risks
Credit Accounts
Your credit report lists your open and closed credit accounts, such as credit cards and loans, along with balances and payment history.
Public Records
Bankruptcies, foreclosures, and court judgments appear here and are red flags for lenders, so it’s best to avoid these situations.
How Can I See My Credit Report?
Here’s a step-by-step guide to accessing your credit report:
Visit AnnualCreditReport.com
This is the official website where you can obtain free credit reports from the three major bureaus: Experian, Equifax, and TransUnion.
Choose Your Credit Bureau
Select which bureau’s report you want to access between the three. You have the option of viewing all three at once or spread them out over the year for more regular monitoring.
Verify Your Identity
You’ll need to answer security questions and provide personal details, including your Social Security number, to verify your identity.
Download or View Your Report
After verification, you can download or view your report online. Be sure to review it carefully for accuracy and note any potential issues.
What Qualifies as a Good Credit Score?
Different lending institutions may use different credit scores, depending on their specific requirements. But generally, a score above 670 is considered good, and anything over 740 is classified as excellent. The higher your score, the more options you’ll have for mortgages, personal loans, and other loans.
Is 700 a Good Credit Score?
While it’s not in the excellent range, a score of 700 falls within a good credit score range. It’s high enough for you to be seen as a reliable borrower, which can improve your chances of securing competitive mortgage rates and terms.
Is a 900 Credit Score Possible?
A 900 credit score may sound like a myth since most credit scoring models cap at 850. However, it’s achievable in some models, like certain versions of VantageScore 3.0 or Score 8.
Benefits of a Good Credit Score
A good credit score offers more than just better loan rates. Here are some additional ways it can improve your financial life:
Lower Insurance Premiums
Insurance companies often use credit scores to assess risk. A higher score can result in lower premiums for auto, home, and even life insurance, saving you money in the long run.
Easier Renting Approval
Landlords frequently check credit scores when evaluating potential tenants. A strong credit score can help you secure a rental without needing to pay hefty security deposits or provide extra guarantees.
Access to Premium Financial Products
With a good credit score, you’ll qualify for a broader range of financial products, including credit cards with higher rewards, lower interest rates, and more favorable loan terms, giving you more financial flexibility.
How Does Your Credit Score Affect Loan Eligibility?
Let’s explore how different score ranges affect your loan options.
Minimum Credit Score Requirements for Different Mortgage Types
Here are the minimum credit scores for various mortgage options:
FHA Loans
FHA loans are popular among first-time homebuyers due to their more lenient credit and down payment requirements. While you can qualify with a credit score as low as 500, most lenders prefer a score of at least 580.
With a score of 580, you are qualified to make a down payment option of just 3.5% of the home's purchase price—making it easier for you to enter the housing market if you have less savings.
However, it's important to note that FHA loans require mortgage insurance premiums (MIP), which will increase your monthly payment.
VA Loans
VA loans are available to veterans, active-duty military members, and their eligible spouses. They tend to have lower interest rates compared to conventional loans, which can save borrowers thousands of dollars over the life of the loan.
These loans often come with no down payment and don’t require mortgage insurance, which can be a significant financial benefit.
While a credit score of 620 or higher is typically required, some lenders may approve borrowers with scores as low as 580, depending on other financial factors.
Conventional Loans
Conventional loans, which are not insured by the government, usually come with stricter credit requirements.
Most lenders require a minimum credit score of 620, but those with scores of 700 or higher will likely qualify for better terms, such as lower interest rates and higher loan amounts.
Down payment options typically range from 5% to 20%, depending on your credit and financial profile.
How Much Can I Borrow with a 700 Credit Score?
With a 700 credit score, your credit risk is considered low. Therefore you should be able to secure better interest rates and loan terms than someone with a lower score, and can even qualify for other financial products or a new line of credit.
How Long Do Items Stay on Your Credit Report?
Here's a breakdown of how long these specific negative marks can linger and what you should know about their impact.
Late Payments
Late payments stay on your credit report for up to seven years from the date of the missed payment.
Although the impact lessens over time, a late payment can significantly hurt your credit score, especially within the first few years.
Making consistent on-time payments moving forward is key to mitigating the damage.
Bankruptcies and Foreclosures
Bankruptcies and foreclosures are more severe negative items that can stay on your credit report for seven to ten years, depending on the type.
Chapter 7 bankruptcy, for instance, remains for ten years, while Chapter 13 bankruptcy typically lasts for seven.
These items can greatly impact your ability to get credit, but their effect diminishes as time passes and you rebuild positive credit behavior.
How Can I Build My Credit Score?
Here are a few long term strategies to help you get started on building a good credit score:
Long-Term Credit-Building Strategies
These strategies will help you maintain and improve your score over the long term:
Opening Your First Credit Account
If you’re looking to build credit, consider a secured credit card or credit-builder loan. To demonstrate creditworthiness, use them responsibly and avoid credit card debt.
Paying Off Debts
Paying off debts is one of the best ways to boost your credit score and reduce financial stress. It also frees up your income, allowing you to focus on saving or investing for future goals.
Maintaining a Low Debt-to-Income Ratio
Debt-to-income ratio (DTI) measures the percentage of your monthly income used to repay debt.
Most lenders prefer a debt-to-income (DTI) ratio below 36%, ensuring you have enough income for other financial obligations.
How Long Does It Take to Rebuild a Credit Score?
Rebuilding depends on the severity of the issue. You can see improvement in 3 to 6 months with good practices, but it could take 7 to 10 years to fully recover from major setbacks like a foreclosure.
How Can I Improve My Credit Score in 30 Days?
Improving your score is usually a long-term process, but paying down large debts such as car loans and correcting credit report errors can provide a quick boost.
How Does Your Credit Score Impact Buying a House?
Let’s take a closer look at how credit score impacts the homebuying process.
Does My Credit Score Impact My Ability to Buy a House?
Yes, a higher credit score makes it easier to buy a house and qualify for a mortgage with better interest rates. Even a slight interest rate difference can save you thousands over the life of a loan.
Does Applying for a Mortgage Hurt My Credit Score?
Yes, applying for a mortgage through pre-approval can temporarily affect your credit score. The pre-approval process involves a hard inquiry, which may lower your score by a few points—usually between 5 and 10.
However, the impact is typically short-lived. As long as you continue to manage your credit responsibly, your score should recover within a few months.
Can I Get a Mortgage Pre-Approval Without a Credit Check?
Unfortunately, no. Pre-approval always requires a hard credit check because lenders need to review your financial history to determine your eligibility for a loan.
However, if you're worried about the effect on your credit score but still want an estimate of how much you might be able to borrow, you could consider pre-qualification.
Pre-qualification is a less formal process that doesn’t involve a credit check. Instead, it’s based on self-reported information, such as your income and assets, giving you a rough estimate of your borrowing capacity.
How Many Times Can You Check Your Credit Score Without Hurting Your Credit?
Checking your own credit score, known as a "soft inquiry," does not affect your score. You can check your free credit score as often as you like without any negative consequences.
In fact, monitoring your score regularly is a good financial habit and can help you spot potential issues early.
Does Closing a Credit Card Hurt Your Credit?
Yes, closing a credit card account can reduce your available credit, increase your credit utilization rate, and shorten your credit history.
However, being an authorized user on another account can help maintain a longer credit history even after closing an account.
Identity Theft and Its Impact on Your Credit Score
Identity theft occurs when someone steals your personal information to commit fraud or other crimes. This can severely damage your credit, as thieves can open accounts, take out loans, or make purchases in your name.
How to Check for Identity Theft
Use credit monitoring services to regularly monitor your credit report for new accounts or inquiries you don’t recognize, and investigate immediately if something seems off.
What if Your Social Security Number Is Stolen?
If your Social Security number is stolen, contact either Experian, Equifax, or TransUnion to place a fraud alert, file a report with the Federal Trade Commission (FTC), and notify your bank. Speed is crucial to prevent further damage.
What is the FICO® Score Simulator?
The FICO® Score Simulator is a tool that allows you to see how different financial decisions could affect your credit score.
These decisions include:
- Paying off a large debt
- Opening a new credit card
- Applying for a new mortgage
How Can I Start the Mortgage Process Today?
Once you understand what’s in your credit report and how it affects your credit score, the next step toward homeownership is pre-approval.
Pre-approval helps you set a clear home budget, boosts your credibility with sellers, and gives you an advantage in competitive markets.
At Rate, our Digital Mortgage pre-approval is quick and easy, and you can complete the application online in as little as 15 minutes. Apply now to take one step closer to your new home.
Rate, Inc. is not a credit repair company or similarly regulated organization under applicable laws and does not provide credit repair services. Where available, recommendations, tips and education materials are provided to you for educational purposes only. The services are intended to provide you with general information and assist you with identifying your options. The information is provided only to enable you to make your own choices about your personal finance, and is not intended to provide legal, tax or financial advice. We do not provide any services to repair or improve your credit profile or score, nor do we provide any representation that the information we provide will actually repair or improve your profile. Consult the services of a competent professional when you need any type of assistance.