When buying Boulder CO homes, or for that matter any real estate property, that is a question that is easily answered: it will cost you plenty. But in order to understand this, it is necessary to know more about credit scoring. A credit score is a number that reflects your ability to repay your debt on time and is used in far more ways than just fixing the terms for your debt.
The term FICO refers to the credit scoring system developed by the Fair Isaac Corporation which is the most commonly used system today. While the exact formula is protected by law, here are some of the factors that are taken into account and the weightage in the total score:
-payment history 35 percent. A good long track record of paying your bills on time is a solid plus.
– How much is your debt 30 percent. The total of what you owe on all your accounts will be considered and the less you owe compared to your credit limit, the higher the score.
-the length of your credit history 15 percent. A longer credit history will generally lead to a better score. However, a shorter history with an impeccable record can still fetch a high score.
-new credit 10 percent. This takes into account the recent credit lines that you have been granted or have applied for. If you are loan shopping, finish the exercise within say one month to avoid damaging your credit score.
-other factors 10 percent. This will take into account factors such as your credit mix.
A credit score below 600 is considered high risk and therefore a poor credit. A score of 700 and above is considered outstanding. Now let us see how being a poor credit can cost you. In the first place, you will find it difficult to get easily accessible and affordable debt because many reputable lenders will simply refuse to lend to you. Even lenders who are prepared to consider any debt will insist on their pound of flesh to compensate for the high risk. You could end up paying interest rates three percent to five percent above the normal as well as high fees, costing you thousands of dollars over the period of your loan.
There are also a flock of indirect costs associated with a low credit score. You may not actually know this but credit scores are used for a number of purposes. For instance:
-prospective employers will routinely check out credit scores for people that they are thinking of hiring and a poor credit score will adversely affect your chances
-landlords check out credit scores for prospective tenants and you could well end up paying a higher rent or a larger deposit of both.
-utility companies such as telephone, electricity and gas will settle rates and the terms by your credit score
Hopefully this information about credit scoring will help readers to assess their credit standing. For those interested in real estate information for various cities please visit sites on Evergreen Colorado Real Estate or Fort Collins Colorado Real Estate
