5 Factors That Affect Credit Scores For Mortgage Borrowers

If you plan to buy a home, understanding the factors affecting credit scores is crucial. Your credit score isn’t just a number; it decides if you can qualify for a mortgage, the interest rate you’ll get, and how much money you’ll save or spend on your loan over the long term. At Gustan Cho Associates, we help borrowers navigate these credit factors daily, guiding them to successfully secure mortgages—even if they’ve had credit challenges.

No lender in this planet will give you a mortgage loan approval without documented income. This holds true even with 850 credit scores after the 2008 real estate and mortgage collapse and the total overhaul of the mortgage industry.

This easy-to-follow guide will break down the essential factors that affect credit scores. You’ll learn exactly what lenders look at, how to improve each factor, and what steps you need to take today to boost your credit scores.

Why Credit Scores Matter for Mortgages

When thinking about buying a home, there are important factors that affect credit scores. A good credit score can help you get a loan with a lower down payment. For example, if you want an FHA loan, you usually need a credit score of at least 580 to put down 3.5%. If your score is between 500 and 579, you’ll have to pay 10% down instead.

For conventional loans, you need a score of at least 620. Larger jumbo loans often require a score starting around 700. Knowing these numbers helps you see what you need to work on to improve your credit score and your chances of buying a home.

 

Let’s explore the main factors that affect credit scores and how to manage them effectively.

Factor #1: Payment History (35% Impact)

Your payment history is the most significant factor that affects credit scores, accounting for 35% of your overall score. Paying bills on time helps your score, while late payments hurt it. Just a single late payment can lower your score by over 50 points.

Action Step: Always pay your bills on time. Set reminders or automatic payments if you tend to forget.

If you already have late payments on your credit report, don’t panic. As late payments age, their impact lessens. A late payment from three years ago will affect you less than one from three months ago.

Factor #2: Amounts Owed – Credit Utilization (30% Impact)

The next major factor affecting credit scores is how much credit you’re using compared to your available credit—credit utilization. This component accounts for 30% of your credit score. Ideally, your credit balances should be below 10% of your available credit limit.

For example, if you have a credit card with a $1,000 limit, keep the balance under $100.

Action Step: Keep your balances low and pay down debt as much as possible. Lower utilization rapidly improves your score.

Factor #3: Length of Credit History (15% Impact)

One of the factors that affect credit scores is the length of your credit history. This part makes up 15% of your score. Lenders prefer to see accounts that have been open for a long time. Older accounts show that you have managed your money and debt well.

Action Step: Keep your oldest credit accounts open. Even if you don’t use them, keeping them open helps your score.

Refrain from canceling credit cards you’ve maintained for many years, even if they are infrequently used. Deactivating these accounts could reduce the duration of your credit history and adversely affect your score.

Factor #4: Types of Credit Used (10% Impact)

One important factor that affect credit scores is having different types of debt. Proving to lenders that you can manage different loans, like an auto loan or credit card, shows responsibility. This can boost your credit score and ease future borrowing.

Action Step: If you only have credit cards, consider responsibly adding a small installment loan or another type of credit to diversify your credit.

Remember, don’t take on new credit unless you can comfortably manage the payments. The goal is to build your credit profile responsibly.

Factor #5: New Credit and Inquiries (10% Impact)

When we talk about the factors that affect credit scores, new credit accounts and recent inquiries are important. These two things make up about 10% of your score. When you want to borrow money or get a credit card, you usually have to apply for it. This means lenders will do a hard inquiry, like checking your credit. Each time this happens, your credit score might go down for a short time. It’s good to be careful with how often you apply for new credit to keep your score high.

Action Step: Only apply for new credit when you really need it. Space out your applications to minimize impact.

Don’t worry too much about minor drops due to inquiries. As long as you handle your credit responsibly, scores usually recover within 90 days.

Recent Updates You Need to Know (2025)

In 2025, the credit scoring model includes alternative data like rent payments and utility bills, which can improve your credit score if they are documented. This revised method is advantageous for those who have a limited traditional credit history.

Action Step: Ask your landlord and utility providers if they report to credit bureaus. If they do, making timely payments can quickly boost your credit score.

Common Mistakes Borrowers Make

Avoid these common pitfalls:

• Closing old credit cards (lowers your credit history length).
• Making late payments, even if just occasionally.
• Maxing out credit cards (raises utilization significantly).
• Applying for multiple new credit lines in a short period.

Each mistake affects your score, but each is fixable with careful planning.

How Gustan Cho Associates Can Help

At Gustan Cho Associates, we focus on assisting borrowers facing credit difficulties in comprehending and handling the elements that influence their credit scores. We provide a step-by-step guide to help you enhance your credit and secure a mortgage that meets your requirements.

Our experienced team helps borrowers:

• Identify specific issues hurting their scores.
• Provide personalized action plans for score improvement.
• Get mortgages even with less-than-perfect credit scores.

Every borrower deserves expert guidance, clear advice, and practical solutions.

Taking Control of Your Credit Score

Boosting your credit score is totally doable if you take the right steps:

• Pay every bill on time.
• Reduce your credit card balances.
• Keep your oldest accounts open.
• Limit new credit applications.
• Check and monitor your credit report regularly.

Consistent, responsible financial habits significantly improve your credit profile.

Ready to Get Started?

Understanding and managing the factors that affect credit scores puts you on the path to homeownership. At Gustan Cho Associates, we’re committed to helping you achieve your dream of buying a home, no matter your current credit score.

Contact our team today to discuss your situation. We’ll help you improve your credit scores and qualify for the best mortgage options. Don’t wait—start improving your credit today and make your homeownership dreams a reality!

Frequently Asked Questions About the Factors That Affect Credit Score:

Q: What are the Most Important Factors That Affect Credit Scores?

A: The main things that affect your credit scores are your payment history, amounts you owe, how long you’ve had credit, types of credit you use, and new credit inquiries.

Q: How does Paying Bills Late Impact the Factors that Affect Credit Scores?

A: Making late bill payments can greatly reduce your credit score. Late payments are one of the most significant contributors to credit scores, and just one missed payment could decrease your score by more than 50 points.

Q: Can Keeping My Credit Card Balances Low Improve My Credit Score?

A: Yes! Keeping your credit card balances low (ideally below 10%) is an important factor in positively affecting your credit scores. The lower your balances, the higher your scores.

Q: Does Applying for New Credit Hurt My Credit Score?

A: Yes, each time you apply for new credit, your score might temporarily drop. New credit applications and inquiries affect credit scores, usually causing a short-term dip.

Q: Is it Good or Bad to Close Old Credit Cards?

A: It’s usually bad. One key factor affecting credit scores is the length of your credit history. Cancelling old credit cards reduces the length of your credit history, which may negatively impact your score.

Q: What Types of Credit can Help Improve My Credit Score?

A: Various types of credit, such as auto loans, credit cards, and student loans, can help enhance your credit score.

Q: How Quickly can I Improve My Credit Score by Paying Off Debts?

A: Minimizing debt can improve your credit score rapidly—typically within a few months. Decreasing your balances is one of the key elements that influences credit scores.

Q: Does Rent or Utility Payments Impact the Factors that Affect Credit Scores?

A: Yes, in 2025, paying your rent and utilities on time can help your credit score if they are reported. This is now one of the newer factors that affect credit scores positively.

Q: Why do Mortgage Lenders Care About the Factors that Affect Credit Scores?

A: Lenders use your credit scores to see how responsible you are with money. The factors that affect credit scores help them decide if you qualify for a loan and what interest rate you’ll pay.

Q: Can Gustan Cho Associates Help Me Improve the Factors that Affect Credit Scores?

A: Yes, Gustan Cho Associates helps you identify the exact issues affecting your credit scores and provides personalized advice on fixing them. We guide you through improving these factors to qualify for a mortgage.

This blog about the waiting period after foreclosure requirements for borrowers on title but not on mortgage was updated on April 18th, 2025.