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Credit report and credit score

Home loans for people with bad credit

How can I check my credit report for free?

How do credit repair companies fix your credit?

How to get rid of bad credit history?

How to remove bad credit from your credit report

How to repair my credit report myself

Illegal credit repair tactics

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What do mortgage lenders look for on credit reports?

What happens to your credit score when you get married?

What is on my credit report?

What is the consumer credit counseling service?

What is the Fair Debt Collection Practices Act (FDCPA)?

What is the purpose of the fair credit reporting act?

Qualifying credit score for a home loan

Which fico score do mortgage lenders use?

People holding up bannerA credit score (your credit rating) is a three digit number that indicates your creditworthiness. Credit scores can range between 300 to 850. A credit score of 300 is the worse possible credit score and 850 is the best credit score you can have. Mortgage lenders, banks, and credit card companies use credit scores to evaluate the lending risk to prospective home buyers and homeowners seeking a new mortgage. In short, lenders use credit scores to estimate the likelihood that you will repay the loan.

Did you know that you (may) have 3 credit scores?

Experian, Equifax and TransUnion companies are the three largest credit bureaus. These credit bureaus (agencies) estimate the credit risk differently, consequently, each credit bureau provides its own credit score. Lenders typically use the “middle credit score” associated with the 3 credit bureaus to evaluate whether the home buyer (or homeowner) will default on their debt obligations.

How are credit scores are calculated

Credit score calculatorThe Fair Isaac Corporation (FICO), the largest credit score company has disclosed that a credit score formula can be divided into five components. Each one of the following categories can influence your credit rating:

Your payment history accounts for 35 percent of your credit score

This category looks at your "on time" payment history and the types of credit accounts you make use of (i.e. credit cards, college loans, installment loans, mortgage, etc.). Judgments, bankruptcies, wage garnishments, liens, past due accounts (if any); plus any accounts in delinquency are considered. Your payment history has the most influence on your credit score.

The loan balances are 30 percent of the credit score

The total amount of money you borrowed (and owe) is calculated in the credit score. This part of the formula looks at whether you payoff your charge cards each month (and on time) or are your credit cards usually at the credit limit? The account balance in addition to the balance due on the open accounts influences the credit score. Add up the total amount on your charge cards and divide the amount owed by the credit card limits. Is percentage lower than 50% or more than 50%. Less is better. Credit balances should be 50% or less.

Account history is 15 percent of the credit score

You might be surprised to know that long account histories are viewed favorably by the credit bureaus. If you want to improve your credit score, avoid paying off your oldest credit accounts, even if they do not have a balance.

Also included in this category are the specific types of credit accounts (i.e. installment, auto, school loans, etc.). The amount of activity on these accounts weigh heavily on your Fico score.

New credit acquisition is 10 percent

Be careful in pursuing new credit (i.e. new charge cards, installment loans, etc.). Credit inquiries and newly acquired debt can influence your credit score, because the credit scoring software can assume changes in lifestyle that may impact your capacity to repay not only the new loan but the existing lines of credit.

Types of credit used is 10 percent

Do you typically make use of charge cards and installment loans or do you avoid credit cards and installment loans (i.e. car loans, school loans, home loans, etc.). The type of credit you use is factored into your credit score.

Frequently Asked Questions About Credit Scores

Are credit scores combined when buying a house?

Lenders use the "middle score" when they evaluate the applicant's credit risk.

Can the credit score affect employment?

You bet. Employers are using credit scores in their evaluation of prospective employees. Seems unfair, but, from their perspective, why hire someone with poor credit when I can hire someone who has a good credit score?

Do credit score inquiries affect score?

Credit inquires can impact a credit score, however, the credit scores are not impacted by mortgage, auto, and student loan inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won't affect your scores while you're shopping for an interest rate.

Do credit scores combine when married?

No. Credit reports and credit scores are identified by each person’s unique Social Security number. Marriage does not merge each partners credit report or credit score.
Learn more about marriage and credit scores

Does the credit score affect car insurance?

Ouch! The credit score can affect the cost of car insurance.

Does the credit score affect pmi?

The credit score heavily impacts on the private mortgage insurance (conventional loans) premium. Fortunately, the FHA, VA and USDA loans mortgage insurance premiums are not affected by the credit score. Learn more about pmi and credit scoring

Which credit score is used to buy a house?

Most lenders use the "middle" score to evaluate the home buyer's credit worthiness. For example, Experian may score your credit at 700, however, Equifax may see it as 680 and TransUnion believes your score should be 660. The Equifax 680 credit score would be used.

Understanding your Fico® Score.pdf