Credit Scores

What is a Credit Score? By definition, a credit score is a numerical rating provided on a credit report that establishes credit worthiness based upon a person’s past credit/payment history and their current credit standing.

In everyday life, when you apply for credit – whether for a car loan, mortgage, credit card, etc., your credit score is used to determine if you will be approved, and with what rate and terms. The higher the score, the safer the borrower. Credit scores have been utilized by lenders for over 20 years, and has become common practice in the mortgage industry.

How does my Credit Score affect getting a mortgage? Credit scores range from approximately 350 to 875 points. A higher credit score often means a speedy and competitively priced mortgage loan. On the contrary, a low score could mean higher interest rates, and more required documentation. Many lenders do not make loans to consumers with scores under 620.

It is a good idea to periodically check your credit report for accuracy. You can contact the credit bureaus directly, or go online and get a free credit report.

Credit Repair – Too Good to Be True?

We’ve all seen the ads “Repair Your Credit –Guaranteed!” or “Perfect Credit in 30 Days!”

Having a good credit score allows for better interest rates on mortgages, credit cards, auto loans, insurance rates and much more. Some employers now check out prospective employees’ credit scores. Is your credit score slowing you down or keeping you from getting your dream job? What can you do to improve your credit score?

Build Good Credit Pay your bills on time, and use credit cautiously or not at all. Close all revolving accounts you are not using. These can be considered available credit and count against you. Don’t consolidate your accounts. Do not let anyone pull your credit unless it is necessary All of these can lower your credit score. When a consumer pulls their own report it does not affect the score.

Go online to learn more about improving your credit score. There are also sites where you can check your credit report for free.

Challenge Derogatory Items When you review your credit report, if there are any inaccuracies, you should contact the creditor and challenge it right away. The Fair Credit Reporting Act (FCRA) provides options for the consumer when the information and accuracy of items in the report is incorrect. All information must be proven correct within 30 days of receipt of your request to the creditor and or they must remove it from the report. Creditors and credit reporting agencies do not make it easy to correct problems. Don’t let them confuse you and give you the runaround. Don’t give up!

Credit Repair Companies Credit repair companies have received a bad name recently. But there are reputable companies out there. http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm There is a lot of information here about credit repair and things to watch out for, as well as credit counseling and other consumer credit publications.

Consumer Credit Counseling There is a difference between Credit Repair and Consumer Credit Counseling services. Credit repair is just that, repairing credit. Consumer Credit counseling services are usually non-profit agencies that help you negotiate with your creditors to accept smaller payments over an extended amount of time. Consumer Credit Counseling can adversely affect credit scores because partial payments may be reported as late payments.

Once a credit report has changed it may take up to 60 days to see the score change. Some mortgage brokers and lenders have the ability to have your score updated immediately. This is called Rapid Rescoring and there may be a small charge. Discuss this option with your lender.

Remember, take charge when it comes to your credit score and history. Get the credit you deserve!

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