Understanding Credit Scores & How They Impact You
Your credit score is a numerical representation of your statistical likelihood to repay credit that is extended to you. Mortgage Scores range from 300-850. Your score is a “snapshot” of a specific moment and can change with new actions and the passage of time.
FICO Scores are calculated from different data that can be grouped into five categories as outlined in the chart. The percentages in the chart reflect how important each of the categories is in determining your FICO score.
Length of History = 15%
- The longer the history, the better.
- How long have your credit accounts been established?
- How long has it been since you used certain accounts?
Types of Credit = 10%
- 2 Installment loans
- 3 Revolving accounts with balances
- Balances on revolving debt below 30% of the high credit
- No collection accounts
- No public records
- No foreclosures
- No late payments
Payment History = 35%
- Do you pay your credit on time?
- Length of positive credit history
- Severity & quantity of delinquencies
New Credit = 10%
- Research has show that opening several credit accounts in a short period of time does respresent greater risk - especially for people who do not have long established credit history.
Amount Owed = 30%
- Quantity of credit Accounts - too many credit cards with balances can lower a score.
What Credit Score
Gets Me The Best Interest Rate?
Why Do Mortgage Lenders Pull 3 Credit Reports?
Mortgage Lenders will utilize a Tri-Merge Credit Report and obtain your credit information from three separate Credit Bereaus, Experian. Trans Union and Equifax. As what may report to no one Credit Bureau may not to another and by doing so, it provides them a full and accurate representation of your Credit Report(s). The middle of your 3 Credit Scores will be used to determine your interest rate, not the average of the three. For example, if your three Credit Scores are 796, 741, and 737, your 741 Credit Score alone would determine your interest rate.
The 5 Fast Ways To Improve Your
Credit Score
Our recommendation is to avoid Credit Repair, feel free to ask us why.
Pay down your current balances
Increase your current Credit Limits
Dispute Inaccurate Information
Consolidate Debt
Re-open closed accounts
