Welcome former American National Bank customers. Click here to learn more about your transition to Atlantic Union Bank.

Your Bank

Credit Scores & Reports: How your credit affects your ability to apply for a mortgage.

Your credit score is a key element in determining whether you’ll be able to get a mortgage and what your rate may be. Your credit score is calculated from a mix of factors in your credit report and suggests how likely you are to fulfill financial obligations, such as paying back a loan.

What is a credit score?

Every credit score falls somewhere between 300 and 850 – even with no credit history, you don’t start at 0. The higher the number, the better your credit history and the better your chances are at being approved for a loan. A score of 670 or higher is considered “very good,” but the average score nationwide is around 700. People with more credit history tend to have higher scores than those without, and higher scores can make you eligible for lower interest rates.

Most lenders will use your FICO* score to determine eligibility for a mortgage and your interest rate. The three major credit reporting agencies – Experian, Equifax and Transunion – reflect different scores and the FICO score is the median between the three.

When it comes to applying for a mortgage, your credit score is used by lenders to gauge your creditworthiness. The credit bureaus collect data on your financial behavior and use it to calculate a dynamic score that changes based on the information they have and even the date you check it.

Factors that drive your credit score to change are:

  • Payment history (35%)
  • Amount of credit owed (30%)
  • Length of credit accounts (15%)
  • Mix of account types (10%)
  • New credit (10%)

While your credit score is important, it’s just one component of what determines your eligibility to get approved for a mortgage and help you get a good rate.

What is a credit report?

Your credit report includes an expansive statement about your credit activity and current credit situation, such as loan payment history and the status of your credit accounts. Your credit score is determined based on the information in your credit report.

Credit reports often contain personal information like your name and other previous names you may have had, current and former address, birth date, social security number and phone numbers. It will also include information on your credit accounts. Current and revolving credit accounts, your credit limit, account balances, account payment history, the date the accounts were opened or closed and the name of the creditor will also appear on your credit report.

Other items that may exist on this report include:

  • Liens
  • Foreclosures
  • Bankruptcies
  • Civil suits and judgments

Before applying for a mortgage, you should look at your credit report to make sure it appears in good standing and that there are no discrepancies. Errors on your credit report can reduce your score significantly, which could mean a higher interest rate. It’s important to correct any of these issues before applying for a home loan.

Along with your credit score and credit report, lenders will look at your total assets, your savings and current income. A best practice is to avoid applying for too much new credit in a short period of time, especially if you’re ready to get a mortgage. When companies pull your credit, it can be reflected on your credit report, and can often negatively impact your score. If you have too many accounts or apply for too many in a short time, you could see your credit score decline.

The best way to boost your credit score and put yourself in the best position to apply for a mortgage is to manage your payment history. Pay on time and in full as much as possible, stay below your credit limit and avoid late or missed payments. Only spend what you can afford and don’t run your balances too high. While you can’t buy a better credit score, using your credit wisely is a tried-and-true method for boosting your score overtime.

If you feel you're ready to take the next steps to either purchase or refinance your home, please follow the appropriate link to speak to one of our experienced Mortgage Loan Officers.


Sources: Banzai, Consumer Finance

*Your FICO score is a credit score created by the Fair Isaac Corporation (FICO). It considers your credit and payment history, level of debt, types of credit used and your new credit accounts. Your lender will use your FICO score to help evaluate your credit worthiness.

This website uses cookies. By accepting the use of cookies, this message will close and you will receive the optimal website experience. For more information, please visit our Online Privacy Notice.