Understanding your credit score
Unless you have a lot of cash, you will likely need a mortgage loan to purchase your next home. How much of a mortgage loan you qualify for is not only dependent on your salary and monthly recurring debt, but also your credit score. You can make $150K per year, but if your credit report shows that you are financially challenged, then you may have problems securing a loan.
Your credit rating is based on the information in your credit report. This information is converted into a number -- a credit score -- that the lender uses to determine whether you are likely to repay your loan in a timely manner.
The scores used in mortgage lending are typically in the 600 to 900 range. A general guide is that the higher your score the better. But you should keep in mind that your credit score is just one of several factors that will be used to evaluate your mortgage loan application.
It is important to know that your credit score is based solely on information in your credit report. Factors such as race, age, religion, national origin, marital status, gender, income, where you live, and employment are not considered in determining your credit score.