Understanding Credit Image

Step 4: Understanding Your Credit

A credit score is a number that is derived from lots and lots of statistical analysis gathered on your credit file. This number is based on different things, like how much you’ve borrowed, how much you’ve used versus not used, when you opened accounts, and most importantly, how you’ve paid your obligations.

If you haven’t established “traditional credit”, take the time now to get started. Banks want to see that your credit report includes a good payment history on at least four items for at least 24 months. Some loan programs require a minimum credit score. Be sure to ask your mortgage loan originator.

Do some digging into your financial past and see what kind of numbers you discover. The nationwide credit agencies (Equifax, Experian and TransUnion) are required by law to provide free credit histories. Once every 12 months, you can order your report at www.annualcreditreport.com.


  1. Keep credit card balances at less than half of your credit limit and make monthly payments on time.
  2. Diligently review your credit report and refute any inaccuracies that show on your credit history by contacting the nationwide credit agencies.
  3. Within a few months of being approved for a home loan, do not open any new lines of credit.
  4. Only open new credit lines, if you intend to use them.
  5. Don’t rush to close unused credit cards – a longer credit history is better for you. If you’re worried you have a couple of “blemishes”, take the time to visit www.debtadvice.org or make a call to your local Housing and Credit Counseling Agency for additional help.

Housing and Credit Counseling Inc. of Kansas, 1-800-383-0217, www.hud.gov

Next Step