Credit

The three major credit bureaus and how to get you free annual credit report

Equifax:   (800) 685-1111

Experian: (888) 397-3742

Trans Union: (800) 916-8800

Visit Free Annual Credit Report for your free annual credit report

 

Good Practice to Improve Credit Scores

Everyone’s profile is different and credit events will affect us in different ways, but there are some general best practices to follow:

Pay all bills on time – A single, recent 30-day late payment can have a significant impact.  A history of periodic late payments is an even larger issue.  Be disciplined about paying the bills on time.

Length of credit history – the longer the better! Think twice about closing that store card you opened in 1986.  Conversely, new credit  accounts will often reduce a fico score.

Avoid New Inquiries –  In the short term the number of credit inquiries can lower your fico score.

Mix of credit – optimally a mix or mortgage, installment and revolving debt seems best.  Owning no credit cards may seem less risky but fico scoring gives advantage to those who have demonstrated they can successfully manage revolving debt like credit cards.

Outstanding Revolving Debt – The amount you own one credit cards and revolving debt (line of credit) in proportion to the credit limits is a close #2 factor behind timely payments in the fico score calculation.  Try to maintain owing 30% or less of your total e card limits.  Closing those old cards you do not use may lower your fico score if you carry balances on other credit cards.

Collections, Charge Offs, Repossessions, Judgments Etc. – try to avoid major derogatory credit items like these.  Even if you dispute a bill say in contact and do what you must to protect your credit history.

Bankruptcy and Foreclosure – these events will normally have a waiting period from the time they are closed out until a person can get a new mortgage loan

 

Lending and Underwriting Credit Score Basis.

A borrower with a score of 680 and above is considered an A+ borrower. A loan with this score will be put through an “automated basic computerized underwriting” system and be completed within minutes. Borrowers in this category qualify for the lowest interest rates and their loan can close in a couple of days. A score below 680 but above 620 may indicate underwriters will take a closer look in determining potential risk.

Supplemental documentation may be required before final approval. Borrowers with this credit score may still obtain “A” pricing, but the loan may take several days longer to close. Borrowers with credit scores below 620 are not normally locked into the best rate and terms offered. This loan type usually goes to “sub-prime” lenders. The loan terms and conditions are less attractive with these loan types and more time is needed to find the borrower the best rates.

All things being equal, when you have derogatory credit, all of the other aspects of the loan need to be in order. Equity, stability, income, documentation, assets, etc. play a larger role in the approval decision. Various combinations are allowed when determining your grade, but the worst-case scenario will push your grade to a lower credit grade.

Late mortgage payments and Bankruptcies/Foreclosures are the most important. Credit patterns, such as a high number of recent inquiries or more than a few outstanding loans, may signal a problem. Since an indication of a “willingness to pay” is important, several late payments in the same time period is better than random lates.