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Helping customers like you achieve their financial goals is all we do, which is why we’re arming you with our expert insight, tips, and advice to help you get there.

The Ins and Outs of a Credit Score

A credit score is more than just a financial “grade.” The rating represents something much more important, and could have a big impact on your wallet. Many first-time homebuyers are curious about improving credit scores, and how that will come into play when applying for a loan.



Credit bureaus like Experian, TransUnion and Equifax, crunch your personal financial data using an algorithm, or a financial model, to determine your creditworthiness. This analysis, in theory, can predict your ability, or inability, to pay your future debts. Understandably so, the information is invaluable when applying for loans.


Unlike the suggested movies “you might like” on Netflix, this algorithm output cannot be ignored. The score is a direct reflection of your credit history, which is a financial inventory of things you’ve paid for. Credit cards, past loans, government information are all sources that make up your history. Other information includes the number of credit cards and loans you have and if you pay your bills on time.


Your credit report is a little different. It includes personal information, including your social security number, the amount you owe and if you have been late, or delinquent, on a payment. Businesses and lending institutions want to know all about your creditworthiness and your credit score.


Credit scores are calculated by:

  • Looking at your credit report
  • How much money you owe
  • Amount of available credit
  • The length of your credit
  • Repayment history

When it’s all added up, your score is an important factor in getting a loan and securing a competitive interest rate/APR. A difference of one percentage point can mean thousands of dollars of interest paid over the life of a loan. It’s a big deal, and luckily for you, you can do something about your credit score.


But first, let’s see how credit scores stack up.


What’s a Good Credit Score?

Excellent credit is generally a score 720 and above; good credit is 660 to 719; fair credit is 620 to 659 and anything 619 and below is considered poor standing. Let’s break it down even more.


Those with the best credit score, 800 and above, are said to be 1-percenters. (Remember, credit scores do not take into account your income, or even employment history). That is, of those with this exceptional FICO score, only 1 percent are likely to delinquent on their bills, according to Experian. They are also likely to experience an easy path to a loan with excellent terms.

  • A very good score is between 740-799, and is above the average U.S. consumer score. It will also likely lead to a better-than-average interest rate on a loan.
  • A good score is between 670-739, which represents the median credit score in the U.S. By these terms, you’re considered an acceptable borrower.
  • A subprime borrower will fall between scores of 580 and 669. At this range, it may be difficult to get a loan. And those who do will pay a much higher interest rate.
  • A poor score of 579 or below is unlikely to get you a loan.
  • A FICO score is a standard or a particular brand of credit score.


Understanding how your score is broken down will help you improve your score over time. The biggest factor is payment history. This accounts for 35 percent of your score. The next biggest component is the amount you owe on your credit (30 percent). The credit history length (15 percent), new credit (10 percent) and types of credit used (10 percent) are the other three variables that enter the equation.


Tips to Boost Your Credit Score

Now, here are some actual things you can do to boost your score.

  1. Sometimes your credit history may be inaccurate and can thus lead to an unfair score. You can dispute these claims with the major credit bureaus. Be sure to have your bank statements and receipts handy to show as proof. You can also dispute errors online.
  2. Make sure your report matches up with reality. Sometime companies may be slow to update the amount you have paid off or a recent bump to your credit limit. Both omissions could impact your score in a negative way.
  3. Do not close out a card. A sudden drop to your credit-spending power does not look good to the bureaus. You can keep it active by perhaps using it to pay a monthly utility bill.
  4. Pay your bills on time. Obviously, no one wants to be late on credit repayments. But since it makes up for 35 percent of your score, we cannot stress enough the importance of paying on time.
  5. Talk it out. You can write a letter of good-will and ask companies to remove or make adjustments on your credit history. Be sure to take responsibility for the delinquency and explain your circumstances that led to your inability to pay. You may have lost a job or your family income went from two to one. Try to tell a personal story. For those with extra cash, be sure to let them know that you can pay a large lump sum.

Note: American Pacific Mortgage Corporation is not a credit repair company; this information is for information purposes only. We are not licensed credit repair specialists or counselors. 


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