Understanding Your Credit Score and Credit Reports is Key to Obtaining a Manufactured Home Loan

I have previously discussed the types of financing available for manufactured homes. A lender will consider your debt to income ratio and other stability factors such as length of employment and how long you have lived at former residences. However, your credit history can be the determining factor as to whether or not you will qualify for financing.

When you apply for a loan to purchase a manufactured home, your lender will check with one or more of the three leading credit reporting agencies to obtain your credit score. Not only will this score determine your qualifications for the loan, it can also affect the interest rate you will be charged. Higher scores improve the likelihood that you will be approved for a loan.

Many factors come into play when determining a credit score. The most common are your payment history, amounts owed, types of credit used, length of credit history, and any new searches for and acquisitions of new credit. Each of these are discussed in more detail below:

Payment History

Missing payments are the most common cause of a low credit score. Missed payments that occurred years ago will not influence the score as heavily as a missed payment from a month ago. Also, a missed payment on a high-balance account stands to cost a lender more if the account remains unpaid, and therefore factors more severely into the score.

Amounts Owed

If an individual uses more than 50 percent of their credit limit on average, this will negatively affect their score. For example, it may be better to have two credit cards at less than 50 percent of its limit than one card at 75 percent of the credit line.

Type of Credit Used

Having more than one credit account can positively affect the score, as it allows lenders to evaluate an individual’s typical payment habits. However, too many accounts can serve as a red flag to lenders.

Length of Credit History

A longer consumer credit history provides a more accurate picture of payment habits.

New Credit (and Inquiries)

Individuals shopping for a new car or mortgage loan will likely have their credit checked multiple times within a few days. Most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score. If a consumer applies for several credit cards within a short period of time, their credit score may be driven lower as looking for new credit can equate with higher risk.

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