Ask the Expert: Credit score isn’t good enough to buy new home

I have saved like mad for a down payment on a house, but now I find my credit score isn’t good enough. Do I have to make more money or what?

Congratulations on your savings. Now, you have to improve your score but that doesn’t require a new job.

Many don’t realize credit scores have nothing to do with income. A person making $20,000 a year could have a credit score equal to another making $100,000. The credit score tells lenders only one thing: How likely you are to pay back the loan.

It predicts this by considering five points:

1. Do you pay your bills on time? Your payment history is worth 35 percent of your credit score. Pay on time, every single time. Never be late.

2. Are you responsible with credit? Credit utilization counts as 30 percent of the score. This is the total of your credit limits divided by your total credit balances. Use no more than 30 percent of your available credit.

3. Your credit experience. Generally, the older your length of credit history, the better it is for your score. It counts 15 percent.

4. Are you applying for a lot of credit now? New credit accounts can hurt your score. Don’t apply for a number of credit cards in a short period of time. This makes it seem as though you are having a financial crisis. Never apply for credit before you apply for a mortgage.

5. Do you have experience with different types of credit? This counts the lowest toward your credit score at just 10 percent. Auto loans, mortgage loans and bank cards are different types of credit. Over time, consumers naturally acquire these types of credit. Stay with the accounts you have and pay them on time.

These days, a credit score of 720 to 750 is usually required for a home loan. However, FHA loans are more lenient.

o, assuming you are looking at homes you can afford, you don’t need to raise your income. Instead, make wise credit decisions and watch your score rise!