Your credit history is important when applying for mortgage. Credit history not only provides lenders with information about your income and payment history but also reflects your quality of payments. Negative items on your credit report could prevent you from being approved for a loan. Generally, you need at least two years of good credit history to qualify for a home loan. Negative entries like late payments or vehicle repossessions as well as home foreclosures can remain on credit for seven years, no matter how much you paid.
Average age of accounts (AAoA)
The average age (AAoA), which is a key factor in determining your mortgage eligibility, is important. If your average age of accounts is too high, your application may be denied. Because your AAoA is affected by how many accounts are open, it could be denied. You can try to lower your AAoA by closing older accounts and opening new ones.
Your AAoA is based primarily on the oldest and newest accounts in your credit report. The older your oldest account is, the lower your score will be. To determine your AAoA, review your credit report. This report shows you all open accounts as well as the dates they were opened. You can calculate your average age of accounts by taking the average of the two oldest accounts and dividing it by the number of open accounts.
VantageScore
Your credit score depends on several factors. These include your payment history and your age. The length of your credit history is also a key factor. The longer it is, the better. Credit responsibly can help raise your score. VantageScore demonstrates that lenders favor people with a longer credit record.
Your credit score will improve if you pay all of your bills on schedule. To ensure you do not miss a payment, set up automatic or reminder payments if you are unable to pay your monthly bills on time. Be sure to inform your lender if you suspect you will be late. If you notify your lender in advance, many lenders will not report missed payments to credit bureaus.
FICO(r)
FICO(r), a numerical rating of the creditworthiness of a borrower, is what you call a FICO(r). It is calculated by analyzing a credit report from one of the three major consumer credit bureaus. The score is calculated using the borrower's payment history and the outstanding credit. When determining whether a borrower qualifies for a mortgage, the FICO(r) score is an important factor.
FICO scores have been required by banks to obtain mortgages. But they could soon be challenged. VantageScore is an alternative to FICO. Although it can be used in a similar manner, VantageScore is used more frequently by investors to fund packaged consumer loans. It is also used to securitize loans by lenders.
For VantageScore to give you a FICO(r), it requires that you have one month credit history
Check your credit score before you apply for a mortgage. A low credit score makes it difficult to qualify for a loan. You can check your credit score using the FICO or VantageScore credit scoring system. FICO is the standard score. It is the one you most likely will use. VantageScore was developed by the three credit reporting companies.
VantageScore uses credit information to calculate a three-digit credit rating ranging between 350 and 800. VantageScore is able to calculate your score even with a single month of credit history, unlike FICO. However, it is important to note that you must have at least one month of credit history to qualify for securing a loan with a FICO(r) score.
Getting a mortgage with no credit history
Even if there isn't a lot credit history, it is possible to get approved for a loan mortgage. Bad credit can mean that you've missed too many payments or taken on too much debt. Bankruptcies and foreclosures can leave a big blot on your credit report. It's possible to get a mortgage even though you have poor credit.
You will need to show lenders that you are able to afford the upfront costs and mortgage payments. You can convince lenders that your credit history will help you repay the loan. This means you'll need credit history to start building credit.