Credit Scoring Summary

35% of the credit score’s weight

Late payments, judgments, liens or collections weigh very heavily on your credit scores. Recent (within the last 12 months) derogatory items are indicative of future default more than those that occurred 24 months ago. The severity of a delinquency (how far past due days or months payment is late) will impact the score. Lates are recorded as 30 (day), 60, 90, 120 etc.

30% of the credit score’s weight

Low balances on several credit cards are better than high balances on a few cards. Balances on your cards should be kept ideally at 30% or below 50% of the high credit limit. For instance if you have a card with $1,000 high credit limit try to keep the balance at ideally $300 or a maximum $500 balance. Keep balances as close to zero as possible for the optimal score. Too or many credit cards can be detrimental. WARNING: Do Not Close Any Of Your Accounts Without First Discussing Your Complete Credit Profile With Your Mortgage Professional. Your Score Could Go Down!!

35% of the credit score’s weight

The longer accounts have been opened, the lower the risk indications are about your score. Closing your seasoned accounts and opening new accounts WILL negatively impact your score. This cannot be stressed enough! AVOID “credit surfing” meaning applying and opening new cards consistently to transfer balances. There must be accounts with recent activity to get a credit score.

10% of the credit score’s weight

Finance company accounts will lower your score faster than the accounts you secure through banks or department stores. No cash or payment due for months in advance accounts appear that you could not qualify for a better type of credit “90 days same as cash” and deferred payments generally (furniture, carpet etc.) are funded by finance companies. These accounts reflect immediately to your credit report as due. If you make a payment before the (example) 12 month in the future due date the account is activated and payments are due monthly thereafter. Try to get a higher balance than what you will be using or consider paying half and taking the other half as financed so that you are not maxing out the high credit limit you were given. Avoiding these offers all together is the best remedy!

10% of the credit score’s weight

Looking for new credit can indicate higher risk. Promotional or administrative inquiries shown on your consumer credit report DO NOT adversely impact your score. Only authorized inquiries will impact your score. You may have unlimited mortgage credit inquiries as long as they are coded as mortgage inquiries within a 45 day time limit. If the inquiries fall within this guideline it will not adversely affect your score, it is scored as one pull within the 45 day time period. This is not true for any other type of credit such as credit card, automobile etc

What Data Do Scores Consider?
Scoring Models DO NOT Consider – Race, gender, religion, marital status, income, nationality, neighborhood, employment history, position or title, sexual preference, or interest rate being charged on a particular card.
Scoring Models DO Include – ALL the credit information stored in the repository’s credit file on you at the time of the request, NOT just the negative credit information.

How Does Credit Scoring Help You?
Credit scoring is not a crystal ball, but it offers real benefits to both lenders and consumers:
1. People get loans faster – Scores are delivered instantly and credit decisions are sometimes made within minutes.
2. Credit decisions are fair – Scores are completely objective. They can’t consider factors such as gender and race.
3. Scoring speeds up credit decisions. Lenders can make decisions more rapidly, and often with less documentation.
4. Credit mistakes can’t last forever. With scoring, past credit problems count against you much less.
5. Scoring helps make more credit available. Lenders using scoring can approve more loans and offer a wider variety of options based on risk level.

Lisa Melby
Firestone Financial Group
Licenses: DOI MT 742264 | CA 0843024 | DRE 01230770 | NMLS 298325
125 Cedar Commons Ln., Ste. A, Kalispell, MT 59901
4010 Moorpark Ave., #104, San Jose, CA 95117
o: (877) 685-6631
f: (408) 351-4277

Copyright © 2019 All Rights Reserved. |  | 877-685-6631, All Rights Reserved.

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