If you are considering purchasing Denver real estate, your lender or mortgage broker will pull your credit report as part of the loan application process. Most lenders use the FICO score (which ranges between 300 to 850 points) to establish your credit worthiness, evaluate your credit risk, and then determine the rate for your loan (assuming you are indeed worthy.)

While FICO calculations remain closely guarded, the recently released list of common credit mistakes will provide some insight as to what will adversely impact your credit score. FICO’s, “Damage Points”, assigns an estimated point drop based on common credit mishaps.

As you can see from the FICO chart, the higher your original score the harder you fall with a credit mistake. If your score was a 780 and you max out a credit card, your score can drop by 25 to 45 points. On the other hand, if you started with a 680 FICO score and max out a credit card, you are looking at a drop of 10 to 30 points. No idea here on the higher you start the bigger you fall rationale, yet it is consistent throughout the model.

Lesson learned – if you are thinking about buying Denver real estate, it is best to know what common mistakes can negatively affect your credit report and ultimately the rate of your loan.

Michelle A. Potter
Denver Realtor
RE/MAX Professionals