Credit

What Is Credit?

Credit is using someone else’s money to pay for things with a contractual agreement to repay the person or company that loaned you the money.

Credit is also one of the most important things you will have to be aware of when starting the home buying process. Your credit score will determine what type of loan you will be able to get. Obtaining a credit report will assist in the evaluation of your credit risk. Lenders and creditors review many characteristics when determining the amount of credit you may be able to obtain.

The Two Types of Credit

Installment Credit

Examples:

  • Mortgages
  • Auto Loans
  • Student Loans
  • Private Personal Loans

Considered less harmful to your credit score

Revolving Credit

Examples:

  • Credit Cards
  • Lines of credit

Considered more harmful to your credit score

What Is Credit?

Credit is using someone else’s money to pay for things with a contractual agreement to repay the person or company that loaned you the money.

Credit is also one of the most important things you will have to be aware of when starting the home buying process. Your credit score will determine what type of loan you will be able to get. Obtaining a credit report will assist in the evaluation of your credit risk. Lenders and creditors review many characteristics when determining the amount of credit you may be able to obtain.

The Two Types of Credit

Installment Credit

Examples:

  • Mortgages
  • Auto Loans
  • Student Loans
  • Private Personal Loans

Considered less harmful to your credit score

Revolving Credit

Examples:

  • Credit Cards
  • Lines of credit

Considered more harmful to your credit score

5 C's of Credit & The FICO Score

Capacity

Ability to repay or sources of income

Collateral

Usually home or auto

Capital

Amount of cash or liquid assets

Character

Credit history (How do you handle credit? Who do you currently have credit with?)

Conditions

Economic conditions of the market

  • Payment History
  • Amounts Owed
  • Length of Credit History
  • New Credit
  • Types of Credit Used

Get to Know the 5 C's of Credit

Capacity

Ability to repay or sources of income

Collateral

Usually home or auto

Capital

Amount of cash or liquid assets

Character

Credit history (How do you handle credit? Who do you currently have credit with?)

Conditions

Economic conditions of the market

  • Payment History
  • Amounts Owed
  • Length of Credit History
  • New Credit
  • Types of Credit Used

Improve Your Credit

Simple Steps

  • Maintain timely payments
  • Avoid high balances on revolving accounts (credit card history)
  • Establish lengthy credit history
  • Limit creditor inquiries
  • Maintain a good credit mix of history, account, and other options

Payment History Tips

  • Get current on payments you have missed
  • Pay the minimum payment on time rather than no payment and a larger payment later

Improve Your Credit

Simple Steps

  • Maintain timely payments
  • Avoid high balances on revolving accounts (credit card history)
  • Establish lengthy credit history
  • Limit creditor inquiries
  • Maintain a good credit mix of history, account, and other options

Payment History Tips

  • Get current on payments you have missed
  • Pay the minimum payment on time rather than no payment and a larger payment later

Learn More

Join the Reno Homebuyer Team at their next seminar and get moving on your path to becoming a homebuyer.