|
-
Credit Scoring -
What
is a "Credit Score"?
When
you apply for credit - whether for a car loan, mortgage, credit card, etc., information in your credit file is fed into a
statistical model. That model assigns a numerical score designed to predict your risk as a borrower. The higher the score, the
safer the borrower (from the creditor's point of view). Credit scores have been utilized by lenders for over 20 years, but have
only become common practice in the mortgage business in the past
5 years. The most widely recognized score for the mortgage
industry is the FICO, or Fair Isaac Score. There are three
credit bureaus in the country of which each have their own names
for the FICO score. The FICO score actually is from Experian,
while Equifax uses Beacon scores and Trans Union has Empirica
scores.
How
does my Credit Score affect getting a mortgage?
FICO
scores range from approximately 350 to 875 points. The higher
the number, the lower the risk of default. A high credit score
may often mean a speedy and competitively priced mortgage loan.
On the contrary, a low score could mean higher interest rates,
and more documentation. Many lenders do not make loans to
consumers with scores under 620. (But Atlanta Mortgage Group
does!)
How
can I get my credit score raised?
It may take some time, but it can be done.
-
Be sure to make all payments on time
-
Close the accounts that you’re not using. (Credit is good -
too much credit will hurt your score)
-
Keep balances on revolving accounts at about one-third of
the high credit limit
-
If you are contemplating applying for a mortgage within 30
days do not pay off any collections, judgements, liens, etc
-
Do not consolidate and pay off bills. Doing so could
actually lower your score
-
Keep inquiries to a minimum. Don’t let anyone access your
credit report unless they have good reason to. (Inquires
made by the person listed on the credit report does not
affect credit scores)
It
is a good idea to periodically check your report to see what is
being reported to your credit file. You may contact the 3 credit
bureaus directly and request a copy of your report. If there is
information in your credit file that is incorrect, re-contact
the 3 credit bureaus, and dispute the inaccuracies. Information
must be presented to all three bureaus to ensure it will be
corrected properly. Your score cannot be changed by any other
source than the 3 bureaus. Here are their phone numbers.
Equifax (800) 685-1111
Experian (888) 397-3742
Trans Union (800) 888-4213
|
