Credit Scores 101

What’s a Credit Score?

A credit score is a number between 300 and 850 that is assigned to you to help a lender gauge your credit-worthiness.

That sounds simple enough, but behind this three-digit number, there’s a mountain of statistical data. All that data gets fed into a credit scoring system that tells lenders how likely you are to make good on your loan.

720-850
Excellent
680-719
Good
620-679
Average
580-619
Fair
350-579
Poor

What Determines Your Score?

35%

Payment History

Paying bills on time is the most important factor when it comes to your credit score. Make sure that you pay at least the minimum monthly payment to avoid any penalties.

30%

Credit Utilization

You won’t help your score by not using your available credit, but you will be penalized for having a high debt to credit ratio. Using 10-20% of your available credit is ideal..

15%

Length of History

A long history of on-time payments and regular credit use adds up. Want a score of 800? That can take 10 years of good credit history to achieve.

10%

New Credit

You don’t want to open too many new credit cards or apply for multiple loans at once. Desperation doesn’t look good on anyone, and that is what new credit scorers see when you try to access too much additional credit.

10%

Types of Credit

Variety is the spice of life. It helps your credit score if you’re able to manage multiple credit cards and an auto loan responsibility.

Improving Your Score

Get Feedback

Reach out to your loan officer. They’re experts when it comes to scoring systems, how different factors weigh in, and actions you can take to improve your score.

Fix Errors

Pay attention to outstanding debts, numbers that don’t match, or potential fraudulent activity on your report. File an online submission for disputes, typically handled within 30 days.

These Things Take Time

If you do have legitimate problems with your credit, some can be fixed easier than others. Start with the easy stuff, and go from there!

Short-Term Solutions

Pay your bills: If you’re late or behind, catch up. Always forgetting the phone bill? Switch to automatic bill pay. In collections? Pay it off.

Reduce Balances: Using too much available credit will count against you. Avoid closing accounts. This reduces your overall available credit, which raises your debt-to-credit ratio.

Don’t Apply for New Credit: This is easy. Don’t apply for new cards or loans while you’re trying to buy a house. Each inquiry counts against you.

Long-Term Solutions

Improve Your Credit History: Fixing errors and delinquencies will help your report in the short term, but lenders want to see smart credit management over the long haul. Make an effort to keep up with bills and to pay down balances. The longer you do so, the better your score will be.

Credit Reporting Agencies and What Matters

You’ve probably heard of Experian, TransUnion, and Equifax. Every time your credit is checked – landlords, utility companies, car dealerships, credit card companies — it’s one of these three companies handling the request.

Where do they find your information? They maintain long-term records about an individual’s credit experience. The most common source is from your own financial institutions.

Why Are Scores Different

Scores vary by only a couple of points. Each agency uses a slightly different scoring model. If they’re off by more, usually an error is to blame.

Which Report Really Matters

Looking at a Tri-Merge report, most lenders have a policy to go with the middle score, assuming that all three agencies’ are slightly different.

Why Doesn’t My Report Match

The key is to request a copy of your FICO report directly. Meet with a mortgage officer for a no-obligation review to see where you stand.

Confused? We can break it down for you.

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