Credit Scores Range Between 200 and 850 (Scores above 680 are considered desirable for obtaining a mortgage)  These factors will affect your score:   1.     Your payment history.  Whether you paid credit card obligations on time. 2.     How much you owe.  Owing a great deal of money on numerous accounts can indicate that you are overextended. 3.     The length of your credit history.  In general, the longer the better. 4.     How much new credit yo have.  New credit, either installment payments or new credit cards, are considered more risky, even if you pay promptly. 5.     The types of credit you use.  Generally, it’s desirable to have more than one type of credit—installment loans, credit cards, and a mortgage, for example.   For more on evaluating and understanding your credit score, go to http://www.myfico.com.     8 Ways to Improve Your Credit YouTubeVideo:  Click here  to listen   Credit scores, along with your overall income and debt, are a big factor in determining if you’ll qualify for a loan and what loan terms you’ll be able to qualify for.   1.     Check for and correct errors in your credit report.  Mistakes happen, and you could be paying for someone else’s poor financial management.   2.     Pay down credit card bills.  If possible, pay off the entire balance every month.  However, transferring credit card debt from one card to another could lower your score.   3.     Don’t charge your credit cards to the maximum limit.  Charge no more than 40% of the total allowed amount.   4.     Wait 12 months after credit difficulties to apply for a mortgage.  You’re penalized less for problems after one year.   5.     Don’t purchase big-ticket items for your new home on credit cards until after the loan is approved.  The amounts will add to your debt.   6.     Don’t open new credit card accounts before applying for a mortgage.  Having too much available credit can lower your score.   7.     Shop for mortgage rates all at once.  Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time, usually 20 – 30 days.   8.     Avoid finance companies.  Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.     This information is copyrighted by the Fannie Mae Foundation and is used with permission of the Fannie Mae Foundation.  To obtain a complete copy of the publication, “Knowing and Understanding your Credit,” vivit http://www.homebuyingguide.org.     25 Need-to-Know Credit-Scoring Terms As you learn about credit scoring, you may hear some new terms. This glossary covers commonly used words and phrases related to the industry. For other terms relating to real estate, go to the Glossary tab on the right side of the screen.   Algorithm: A complex mathematical model. In credit scoring, it is used to compare data in millions of credit reports and predict a person's likelihood to repay debts.   Bankruptcy: A legal proceeding designed to help people in financial difficulty get a fresh start by relieving them from having to pay their current debts. Bankruptcies usually stay on a person's credit report for 10 years.   Charge-off: An unpaid portion of a bill that a lender has accepted will never be paid and has recorded on the books as a bad debt. It is a serious negative item on a credit report.   Collection: A creditor's attempt to recover a past-due payment by turning the account over to a collection department or company. Having a debt in collection is a serious negative item on a credit report.   Credit bureau: A credit-reporting agency that is a clearinghouse for information on the credit rating of individuals or firms. Often called a "credit repository" or a "consumer reporting agency." The three largest credit bureaus in the U.S. are Equifax, Experian and TransUnion.   Credit history: A record of a person's use of credit over time.   Credit limit: The most that can be charged on a credit card or to a credit line.   Credit report: A document containing financial information about a person, focusing on his or her history of paying obligations, such as a mortgage, car payment, utilities, and credit cards. Also includes current balances on outstanding debts, the individual's amount of available credit, public records such as bankruptcies, and inquiries about credit from various companies.   Credit risk: The measure of a person's creditworthiness. People who are more likely to repay their debts on time are considered a better risk by lenders, and will be charged lower interest rates for borrowing money.   Debt-to-available-credit ratio: The amount of money a person has in outstanding debt, compared to the amount of credit available on all of the individual's credit cards and credit lines. The higher a person's debt to available credit, the more risky the individual appears to potential lenders.   Default: A designation on a credit report that indicates a person has not paid a debt that was owed. Accounts usually are listed as being in default after several reports of delinquency. Defaults are a serious negative item on a credit report.   Delinquent: A designation on a credit report that a person hasn't made the minimum payment on a loan or a credit card on time. On credit reports, delinquencies are usually shown as being 30, 60, 90 or 120 days delinquent. Delinquencies are a serious negative item on a credit report.   Equifax: One of the three major credit-reporting agencies.   Experian: One of the three major credit-reporting agencies.   FICO scores: The most commonly used credit score. The name comes from the Fair Isaac Corporation, which developed the scoring model. They are used to predict the likelihood that a person will pay his or her debts. The scores use only information from credit reports.   Hard inquiry: An item on a person's credit report that indicates that someone has asked for a copy of the individual's report. Hard inquiries are requests that result from a person applying for credit, such as a mortgage, a car loan, a credit card or a rental application. They are included in the formula for determining a person's credit score.   Installment credit: A type of credit in which the monthly payment is the same every month and the loan has a set time period. The most common forms of installment credit are mortgages and car loans.   Judgment: A decision from a judge on a civil action or lawsuit; usually an amount of money a person is required to pay to satisfy a debt or as a penalty.   Lien: A legal claim placed on a person's property, such as a car or a house, as security for a debt. A lien may be placed by a contractor who did work on your house or a mechanic who repaired your car and didn't get paid. The property cannot be sold without paying the lien.   Public record: Information on your credit report that has been obtained from court records, such as bankruptcies, judgments, and liens. These are never good.   Rate shopping: Applying for credit with several lenders to find the best interest rate, usually for a mortgage or a car loan. If done within a short period of time, such as two weeks, it should have little impact on a person's credit score.   Revolving credit: An account that requires a minimum payment each month plus service charges on the remaining balance. As the balance declines, so does the service charge.   Soft inquiry: An item on a person's credit report that indicates that someone has asked for a copy of his or her report. Soft inquiries can be from current creditors reviewing the file, prospective creditors who want to send out an offer such as a pre-approved credit card, or a person's own review of their file. They are not included in the formula for determining a person's credit score.   Trade line: An account listed on a credit report. Each separate account is a different trade.       Reprinted from REALTOR® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS® Copyright 2005.  All rights seserved. www.REALTOR.org/realtormag