| Your credit Score. What it is? What does it mean? |
they affect your ability to get it a loan? How do they affect the interest
rate and the points you have to pay? You may wonder whether your
credit score is accurate. Here we will explain credit scores and how you
can improve your score.
| Choose A Topic |
2. What is a Fico Score?
3. How can Credit Scores affect the price of a loan?
4. How to improve your Credit Score:
a. Making timely payments
b. Limit the number of trade lines
c. Avoid unnecessary high credit limits
d. How you use credit
e. Do not apply for credit you do not need
5. How to correct mistakes on your credit report
| What is a Credit Score? |
underwriting- they try to evaluate Your ability and willingness to repay
your loan. They judge your ability To repay by looking at the amount of
your income and how stable your past Earnings have been. This helps
them to determine if you can afford the loan Payments. They judge
your willingness to repay by looking at your past credit History.
Generally speaking, someone who has made payments on time in the
past will probably do so in the future.
Lenders Want their evaluation to be as accurate, objective and consistent
as possible. In an effort to achieve these goals, mortgage lenders recently
began using Credit scores to help in the underwriting process. Credit
Scores are numerical Values that rank. Your score is based on your past
payment history, the amount Of credit you have outstanding, the amount
of credit you have available, and Other factors. According to Fannie Mae
and Freddie Mac, two of the largest Purchasers of home loans and lenders,
credit scores have proven to be very Good predictors of whether a borrower
will repay his or her loan.
Many Lenders use credit scores to help valuate loan applications. However,
a credit Score is just one of the many factors considered in the underwriting
process. Lenders look at the entire picture. Even when a credit score is low,
lenders Try to find other factors that could overcome the negative credit
issues And satisfy their underwriting criteria. The decision to approve or
deny a Loan may be made based on sound, flexible underwriting guidelines
| TOP |
| What is FICO Score? |
FICO scores use credit bureau information to obtain a score which
indicates How likely someone is to make their loan payments on time.
Millions of consumers' Credit bureau records were used to develop the
scorecards, and all of the Consumer data- not just negative information-
was included to develop the System. FICO scores range from approximately
350 to 900. The higher the score The more likely someone is to make their
payments. Similarly, the lower the Score the more likely someone is not to
make their payments.
| TOP |
| How Can Credit Scores Affect the Price of a Loan? |
they may also be a factor in determining the price of your loan. The price of
a loan means the interest Rate and the points charged by the lender and/or a
mortgage broker. The price charged for a loan will be higher or lower
depending on various factors.
Credit scores are used in determining the price of a loan because they are
believed to be good predictors of the borrowers ability and willingness to
repay loan. Many mortgage loans are sold to investors, and investors will
pay a more favorable price for loans they feel have low risk of default.
Thus, applicants with lower credit scores may pay higher prices for their
loans because of the higher risk of default and loss.
There are many other factors relating to an individual borrowers situation
that may also affect the price of a loan, often even more so than credit scores.
These include: the type of property securing the loan (detached single family
residence, duplex, etc); the amount of the borrowers equity in the property;
the lenders costs to make the loan; and the type of loan selected. For example
, a loan secured by a duplex because duplexes are more difficult to sell than
single family residences. Similarly, the price of a loan where the borrower
has made a 20% down payment may be less than a loan where the borrower
has made a 5% down payment because the first borrower has more equity
in the property and, thus, the greater incentive to make the payments on
the loan.
| TOP |
| How To Improve Your Credit Score: |
credit profile, it is not possible to quantify in advance exactly how each item
in your credit history numerically impacts upon your ultimate credit score.
No one can tell you, for example, how much your credit score will be affected
if you pay off a
delinquent account or cancel a credit card. We do know, however, that there
are things you can do to improve your credit profile. Some of the factors
which may impact your credit scores include :
| Making timely payments: |
Delinquency, foreclosures, bankruptcies and judgments will decrease
your score.
| TOP |
| Limit the number of trade lines: |
lines ") you have available will affect your score. If you have a lot of trade
lines, this may decrease your score because of the risk that you might not
be able to pay off all of your accounts, and this may affect your ability to
pay off your mortgage loan. You may wish to consider canceling credit
cards you do not use regularly or choosing 2 to 4 cards to use and canceling
the rest. If you close or cancel an account voluntarily, it will not have a
negative effect on your credit score. You may wish to reconsider accepting
"pre-approved" offers for your credit cards, or if you accept an offer,
perhaps you should cancel another credit card. On the other hand, if you
have no trade lines, this will likely decrease your score. Lenders generally
want to see that you have some available credit and that you can handle
your credit wisely.
| TOP |
| Avoid unnecessarily high credit limits: |
limit) compared to your income when making underwriting decisions.
Having credit limits that are too high relative to your income can affect
your score just like having too many trade lines.
| TOP |
| How you use credit: |
score. In general, the lower the amount outstanding, the more likely it is
that your score will be higher
| TOP |
| Do not apply for credit you do not need: |
one or more of the three credit bureaus. Each such credit inquiry will stay
on your record and will affect your credit score. Even if you are turned
down for credit or change your mind and withdraw your application, your
credit score will be affected. This is because each inquiry suggests that you
are increasing the amount of credit available to you. Before you give your
Social Security number to anyone, make certain you know how they are going
to use it. A Social Security number is almost always required to run a credit
report. But don't let the fear of inquiries stop you from shopping for the best
deal when you need auto or home financing. Recently, the credit bureaus
have recognized that borrowers may apply for credit at more than one place
for the same transaction. Generally, the credit scoring companies will
consider all auto or mortgage loan inquiries received it in a 14 day period as
one inquiry so the additional inquiries will not affect your credit score. And
remember, if you order a copy of your credit report to make sure it is
accurate, this will not show up as an inquiry on your record.
| TOP |
| How To Correct Mistakes On Your Credit Report: |
that you obtained a copy of your credit report from time to time to make
certain the information is accurate. If the information is not accurate (for
example, someone else with the same name as yours may have their credit
mixed up with yours), you should immediately take steps to get it corrected
. No one can do this but you.
Lenders, credit card issuers and other credit providers send regular reports
about their accounts to the major credit bureaus. This is where the inform-
ation on your credit report comes from. There are three major credit burea-
us; you should contact each one because not all credit providers report to
each bureau. Also, if you have a joint credit (for example, if you are marr-
ied and have joint accounts with your spouse), it is a good idea to get the
credit report for each of you because there may be information on one
report that does not appear on the other. If you ask for a copy of your
credit report to check your credit history, it will not affect your credit score.
You can reach the 3 credit bureaus at the following phone
numbers:
| Equifax: | 800-685-1111 |
| TransUnion: | 610-690-4949 |
| Experian(TRW): | 800-682-7654 |
In most cases, there is a small charge to obtain a copy of your credit report.
If you find errors on your credit report, follow the directions included with
your credit report regarding disputes or errors. Generally, you must write
the credit bureau and advise them of the error or dispute. You may need to
provide proof that the bill was paid or other information about the claim or
dispute. The credit bureau will then contact the provider of credit who
reported the information, and the provider will have 30 days to respond.
If the provider of credit agrees that there is an error, it will instruct the
credit bureau to delete the item from your credit report.
You should allow at least 30 days after you have notified a credit bureau of
an error in your credit report for that error to be investigated and resolved.
It may take longer depending upon the nature of the error and the
investigation to be done.
Call us today (561-327-4044)
