Lenders want to know your credit score when you’re getting ready to buy, but why? What is a credit score, and why do lenders care?
Well, a credit score is a number between 300 and 850 that indicates how likely you are to repay a debt. Less than 1% of Americans score below 470, and the highest average was in 2015 at 695. Each of the three credit bureaus (TransUnion, Equifax, and Experian) produces their version of the credit score based on several factors. Those factors include how many accounts you have, how long those accounts have been open, the type of account (revolving, fixed, etc), the amount of credit extended, how much credit you’re utilizing, and if you’ve even had trouble repaying debts.
All these factors are weighed a little differently by each bureau, but they all account for these items, and they churn out a score based on what they know about you. Then lenders have at least a generalized idea of your likeness to repay.
Obviously, the higher the better when it comes to credit score. If you’re worried about your credit score, it’s not time to steer clear of lenders. Ironically, it’s time to get in touch with one…because they can coach you on what to do next to clean up your credit so you’re ready for your upcoming purchase.