You may have heard the term “Equifax Score” and wondered what it is and who Equifax is. If you’ve never heard the term before, that’s OK too.
Unless you’ve tried to borrow money from the banks, you likely haven’t needed to know about it. Here’s what you need to know:
What is It?
Your Equifax Score is a number between 350 and 700, set by your credit file keepers: Equifax.
This number will help mortgage lenders decide whether or not to approve you for a mortgage, as the number displays certain trustworthiness and financial stability, based on how high or low it is. The scoring system goes something like this:
- Very Good: 700+
- Good: 600 to 700
- Average: 550
- Bad: 400 to 500
- Very Bad: <400
Your Equifax Score is determined by your credit file, which displays much of the results of your financial decisions over the last several years.
These include debts, defaults, loan applications made, court writs (for example, if you have been taken to court by a financial institution or individual), court judgments, and bankruptcy filings. It also includes your basic personal information.
Who is Equifax?
Equifax is a multinational analytics, data, and technology company that helps individuals with large-scale financial decisions. This includes things like the purchase of a house or obtaining of some type of loan.
Why does your Equifax Score Matter?
Your Equifax Score will determine your eligibility for a number of things. As it is a metric of your reliability as a borrower, it will help a lender decide if you are a good candidate for a loan, particularly loans such as mortgages or vehicles.
Your Equifax Score will stay with you throughout your life and will directly affect what you can and cannot do with your life. So, ensuring that it is kept in good order is to your benefit. This means ensuring that bills are paid on time, debts owed are paid off, and that you maintain good financial discipline in general.
How Can My Equifax Score Be Used?
Your Equifax Score can be used in a variety of ways to determine your financial health and eligibility for things like mortgages from banks.
Banks check your Equifax Score to determine if you are a good candidate for such an investment on their part.
What Equifax Score is Needed To Buy A House?
If you’re looking to get a mortgage, one of the first things you should do is to check with your bank about what credit score is needed in order to qualify.
Typically, this number is between 650 and 700. Anything over 700 will put you in a pretty good spot, as you can qualify for a lower deposit rate, lower interest rates, and lower associated fees.
What About Bad-Credit Mortgages?
Bad-credit mortgages are reserved for those who have made financial mistakes in their life – and th ey tanked their credit score to a number between 400 and 500. Having this happen to you doesn’t necessarily ruin your financing options for a new home.
You might qualify for a bad credit mortgage. Meaning that your interest rates will be higher, your other fees associated with a mortgage will be higher and your deposit will be higher.
My Equifax Score is Low, What Can I Do To Bring It Up?
If you don’t want to sign onto a bad-credit mortgage – completely understandably so – you may want to consider making some moves that would raise your Equifax number to something that’s more amenable to a bank. The first thing you should do is get a copy of your credit report and see where you’re at.
Then, you can set about doing positive things to increase your Equifax number, like paying down your credit card debt. You can also make a choice to close a credit card account, which may indicate financial discipline and raise your Equifax Score slightly.
Ultimately, you must know that having a low Equifax number isn’t the end of your financial dreams, but it may take some time to bring that number back up. After all, lenders are all about trust.
If they see a prolonged period of making bill payments on time, paying off credit cards, not putting themselves into risky financial situations, they may be more inclined to take that risk and fund you for a traditional-credit mortgage.
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Author: Luke Fitzpatrick