Credit Info

The Credit Bureaus: Equifax: www.equifax.com credit score is called the Beacon Score Transunion: www.transunion.com credit score is called the Empirica Score Experian: www.experian.com credit score is called the FICO Score         How do I order a free credit report? You can order 1 free credit report (without scores) from each of the credit bureaus once per year at the following: Internet: www.annualcreditreport.com Toll free: 877-322-8228 Mail: Annual Credit Report Request Service PO Box 105281 Atlanta, GA 30348-5281 What is a credit score? A credit score is a snapshot grading of an individual’s likelihood of becoming delinquent on a loan 90 days or more at some point in the future. What is the difference between the varied scores? Credit scores range from 300 – 850 and the higher the credit score, then the better the credit. >= 720 Outstanding score and will usually qualify for a borrower for the best of any programs or rates.  Only 1 out of 1300 people have an 800 credit score. 680 Good score and will qualify for most full income documentation 1st mortgage programs just as a 720 would, but if there is a need for a 2nd mortgage or an alternative income type program then there is going to possibly be a rate bump or other similar act. 620 This is a fair score. The borrower still may qualify for many 1st mortgage programs just as the higher scores, but when it comes to a credit score driven program there will be more of a rate bump and lesser loan to values. <= 560 Programs are much more limited in these ranges and rates can be higher. There are other compensating factors in these cases though, such as low debt ratio, low loan to value, large assets or reserves, etc. How is a credit score determined? 35% of the score is calculated based on payment history, such as late payments, bankruptcies, collections, etc. The more recent and derogatory the late payment, the more it hurts the score. Missing low payments is better than missing large payments. 30% of the score comes from balances or relationship of balance to high credit limit. For instance, it is bad to have a credit card that has a balance near the high credit limit or maxed out. Ideally you want to keep your balances less than 20% of the high credit limit. The main levels to watch out for are: 75% or more is the worst, 50% or more is not as bad, 30% is next, below 20% (preferably 10%) is where you want to be for maximum score. 15% of the score is the length of credit history. This means you want to hold on to old credit cards, even if the rate is not good. You are rewarded for having long term credit card debt. 10% of the score is the type of credit and a good mix is always best – an auto loan, a mortgage payment, a credit card, etc. Three to five accounts are optimum. 10% of the score is inquiries made on the borrower’s credit report. Inquiries can affect your score for up to 1 year. The initial 10 inquiries affect your credit score and after that, it doesn’t matter. Also, multiple mortgage and auto inquiries are treated as one as long as they are within a 14 day period of time. Things to do: Review your credit report from all 3 bureaus minimum once per year. Have any errors disputed and corrected. Don’t let surprises happen when you are getting a mortgage or other type of credit. Buyers should get pre-approved for a mortgage loan before signing for a home. This will make more efficient use of everyone’s time including the seller of a potential home, both agents, and the buyers themselves. Getting issues handled early rather than later would be better also. Finally, a buyer may not realize what price they actually qualify for. The buyer could afford more house or may be looking at something he can’t afford. Follow these simple rules in keeping a good credit score: Pay bills on time Keep inquiries to a minimum Keep balances low on all revolving accounts Don’t open accounts and close them quickly over and over. Choose a creditor wisely and keep the account for a long time