Scoring your Credit - How's your Credit Score?

In today's increasingly automated society, it should come as no surprise that when you apply for a mortgage, your ability to pay can be reduced to a single number. All the years you've been paying your mortgage, car payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

All three of the major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. The best known is called the FICO score, based on a model developed by Fair Isaac and Company (hence the name) and used by Experian. Equifax's model is called BEACON, while TransUnion uses EMPIRICAL. While each of the models considers a range of data available in your credit report, the primary factors are:

• Credit History - How long have you had credit?
• Payment History - Do you pay your bills on time?
• Credit Card Balances - How much do you owe on how many accounts?
• Credit Inquiries - How many times have you had your credit checked?

Each of these, and other items, are assigned a value and a weight. The results are added up and distilled into a single number. Credit scores range from 350 to 850, with higher score being better. Typical home buyers likely find their scores falling between 600 and 800.

Credit scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

What can you do about your credit score?  Unfortunately, not much in a short period of time. Since the credit score is based on a lifetime of credit history, it is difficult to make a significant change in the number with quick fixes. The most important thing is to know your credit score and to ensure that your credit history is correct.

For no fee, you can quickly get your credit reports from all three reporting agencies. Also available is some helpful information and tools that help you analyze what actions might have the greatest impact on your credit score.

Armed with this information, you will be a more informed consumer and better positioned to obtain the most favorable mortgage available to you.  If you have had problems in the past or know of your bad credit, please contact us immediately to get the ball rolling. It takes 30 to 60 days to correct credit errors.