A credit score is a numerical expression that shows your creditworthiness to the lenders – whether you can repay the loan on time or not. The higher the credit score, the better the possibility to get the loan approval early. Besides, it will help you to get lower interest rates.
However, that does not mean you can’t get a home loan with low or bad credit. There are lenders, who offer house loans for bad credit in Houston. But you may need to come with a good down payment and/or have to ready to give a large mortgage rate over the life of the loan. Before you apply for this loan, take a look at the myths that are often associated with credit scores.
- Myth 1: Income can impact the credit score
Most people are in the concept. But it is not true. Your income does not affect your credit score. FICO scores are calculated by using many diverse pieces of credit date ground into five categories, including payment history, length of credit history, amounts owed, credit mix, and new credit. Your income is never included on credit reports. Income matters for credit cards, as well as loan applications. Mortgage lenders approve loans based on diverse things, including your earrings and your credit scores. But they are completely two different things.
- Myth 2: Debit cards can help to improve credit scores
People also believe that debit cards can build a credit history or help to improve credit scores. It is also a misconception. Your debit cards don’t affect your credit history and have no impact on your credit scores. Using your debit card is essentially the same as using your cash. Even if you select “credit” at checkout, it will determine how the merchant processes the card, and what fees it pays.
- Myth 3: Closing credit card is good for your score
Many believe that closing a credit card is good for your credit score. But actually, closing credit cards can hurt your score, not help to build a score. The main issue is that it reduces your amount of available credit. Credit utilization refers to the ratio of your credit card balances to your credit card limits. The lower the ratio, the better it would be for you. Besides, closing cards affect the length of your credit history. Closing accounts that you have had for a long time will shorten the average of your accounts that will reduce your credit score as well.
- Myth 4: Credit score will be good without having any credit card debt
Many think that their credit scores will be good as long as they don’t have any credit card debt. Credit card debt is not good. But will you be rewarded, if you don’t have any? Well, you have to find it out. Creating a positive credit history is completely impossible without consistent and on-time payments. Without open and active accounts on your credit report, you won’t even have a credit score. If you have a loan with solid payment history, you can still have a good score even without having a credit card. But building a good credit history is easier if you have a credit card.
As the reality about a credit score is now unfolded before you, without waiting any more, opt for the lenders, who offer low credit home loans and apply for the loan today.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.