Your credit score is a computerized calculation based on five factors. Each factor weighs differently on your credit score. Points are awarded in each category and a higher score is more favorable. The impact of the five factors on your credit score is as follows:

 

Paying debt on time and in full will positively affect your score, while missing a payment or paying late will negatively affect your score.

 

This is a ratio between the outstanding balances vs. available credit. Borrowers should aim to keep balances below 30% of available credit.

 

Credit history indicates the duration of time since a particular form of credit was established. A longer history of credit will benefit your credit score.

 

This portion of the credit score refers to the variety of auto loans, credit cards, and mortgages. A good mix will have a more positive effect than weighted debt on credit cards.

 

This share of your credit score quantifies the number of inquiries made on your credit in a six-month period. Each hard inquiry can cost 2-25 points on your credit score, so you should be mindful of how many inquiries you allow.

 

Remember that your credit score is merely a snapshot of your credit profile today, so it can fluctuate dramatically within the course of a month. If you would like to learn more about your credit score, call for your free copy of the Consumer Credit Scoring Handbook.

 

 

Your credit score is a numeric guideline for lenders to determine your ability to pay back a loan. A lender applies a factor of risk in your ability to pay back which affects your interest rate. Therefore, a borrower with a high credit score would be considered low-risk to a lender and would benefit in the form of lower interest rates, lower monthly fees, and a lower amount of interest being paid over the total life of the loan. On the other hand, a borrower with a low credit score would be considered high-risk for a lender. The lender would charge a higher interest rate to protect itself from a borrower defaulting on the loan. This could cost a borrower with a low-credit score thousands of extra dollars each year and even hundreds of thousands over the life of a 30-year loan.

 

A middle score of 680 is considered average and will allow you access to the majority of loan programs available. A score above 720 will usually result in a better rate and more flexibility in qualifying. A score below 620 is considered sub prime and will generally result in a higher mortgage rate with more restrictions.

 

Managing your credit scores can save you thousands of dollars and countless hours of aggravation. Work with an experienced mortgage planner who knows how to improve your scores and manage them into the future.

 

                       

If you find errors on your credit report, you should take the following action:

 

1. Make a copy of the report and circle the errors. Keep the original for your own records.
2. Call the credit reporting agency that provided you with the report, requesting the erroneous items be removed. If you have proof of payment for an item in question, have it available to reference during your phone call.
3. Call the creditor which reported the problem. This is especially important if you feel you are a victim of fraud or identity theft. Inform the creditor that you are disputing an error which was reported to the credit reporting agency. Explain why the claim is inaccurate. Again, have all relevant documentation available to reference during the conversation.

 

Resolving credit report errors is most easily accomplished over the telephone. The phone numbers are usually on the credit report, or can be easily located on-line. If you cannot remedy the issue by phone, complete the above steps in writing and be sure to send all correspondence by certified mail.

 

A professional mortgage planner can further assist you with credit issues. For more information, contact me to receive your free copy of the Consumer Credit Scoring Handbook.

 

 

 

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