A Guide to Credit Scoring Models

What does this mean for you? While there are many different scoring models, the same principles for improving your credit score apply across the board. “What is far more important than the number itself is understanding what you need to do to make that number better,” Griffin says. “The scores may be different, but risk factors tend to be very consistent from one credit score to the next.” Sprauve boils down credit improvement to three key steps. Pay all your bills on time, because payment history makes up 35 percent of your FICO score. Keep revolving balances low, ideally to 30 percent or less of your available credit, and only open new credit when you need it. “You don't need a lot of different accounts, so don’t be tempted by those credit offers that you get in the mail or when you go to a store,” he says.

Credit Scoring Shouldn't Be Unfair to Minorities.

Scoring considers only credit-related information. Factors like gender, race, nationality and marital status are not included. In fact, the Equal Credit Opportunity Act (ECOA) prohibits lenders from considering this type of information when issuing credit. Independent research has been done to make sure that credit scoring is not unfair to minorities or people with little credit history. Scoring has proven to be an accurate and consistent measure of repayment for all people who have some credit history. In other words, at a given score, non-minority and minority applicants are equally likely to pay as agreed. Knowledge is Power and Credit is King! Call 18004421591 - Gaining Financial Stability with Intelligence and Integrity!

7 Steps to Take Now If You Plan to Buy a House in 2019

Is 2019 the year for a new house? If so, it’s time to prepare before the spring real estate season gets underway. There are a number of steps you can take during these dreary winter months to make your house hunt more successful once the weather — and the housing market — warms up. 1. Check your credit report. The credit scores that mortgage lenders use to set terms and interest rates are calculated using information on your credit report. You can see what information banks will get by pulling your credit report from the three major bureaus: Equifax, Experian and TransUnion. If you haven’t asked for your reports in the last 12 months. Comb through each report to make sure each account is yours and the details are correct. Follow each bureau’s instructions on how to fix any errors. 2. Determine your budget. Make sure you know how much you want to spend on your home. The rule of thumb is to not spend more than 30 percent of your gross income on housing expenses, including taxes and insurance. Use an online calculator like this one from Zillow to help figure out how much house you can afford. 3. Get your down payment sorted. Figure out how much you’ll be putting toward the purchase of your house and where that money is coming from. If the money for your down payment is in different accounts, consolidate the cash into one savings account at least three months before you buy a home. That way, you can avoid having to show extra documentation to your mortgage lender to track where the down payment originated from. 4. Prioritize your wants and needs. Once you know how much you can spend, figure out what home features are the most important to you and which ones you can compromise on to stay within budget. Consider location, neighborhood schools, commuting time and nearby amenities like restaurants, grocery stores and nightlife. Also, think about house features. How many bedrooms and bathrooms do you need? What about a garage? Can you deal with a cheaper fixer upper or would you rather not have to do renovations? Once you have a priority list, it’s easier to strike off a potential house that doesn’t meet your top needs or wants. 5. Pay your bills on time. Be extra vigilant about paying your bills on time in the months leading up to your home purchase. Pay down any big balances on credit cards, too, if you can sacrifice the extra cash. Avoid ballooning those balances even more. You don’t want your credit score to slip before you close on a mortgage. If your score does fall meaningfully, your mortgage lender may adjust the terms or rate of your home loan to reflect that. 6. Don’t make any other financial moves. If you’re in the market for a car, wait until after you close on your house. Similarly, avoid opening new credit cards or applying for any other credit. If a mortgage lender sees that you’re seeking other kinds of debt, the lender may consider you a riskier borrower and offer less attractive terms or rates. 7. Get a pre-approval or conditional mortgage commitment. Make yourself the most attractive buyer by having a pre-approval or conditional mortgage commitment in hand. This tells a seller that not only are you serious about buying, but that a mortgage lender is ready to provide a home loan to close on a purchase. That may be enough to help you win a bidding war. Credit is King and Knowledge is Power! Gaining Financial Stability with Intelligence and Integrity!

Credit score facts & fallacies

Fallacy: A score determines whether or not I get credit. Fact: Lenders use a number of facts to make credit decisions, including your FICO® Scores. Lenders look at information such as the amount of debt you can reasonably handle given your income, your employment history, and your credit history. Based on their perception of this information, as well as their specific underwriting policies, lenders may extend credit to you although your score is low, or decline your request for credit although your score is high.

How your credit report is maintained

TransUnion, Equifax and Experian are the three bureaus that maintain credit reports. They issue credit reports to creditors, insurers and others businesses as permitted under law. When you apply for any new line of credit – for example, a new credit card - the creditor requests a copy of credit report from one or more of the credit bureaus. The creditor will evaluate your credit report, a credit score, or other information you provide (such as income or debt information) to determine your credit worthiness, as well as your interest rate. If you’re approved, that new card – called a tradeline, will be included in your credit report and updated about every 30 days. Tens of thousands of credit grantors – retailers, credit card issuers, banks, finance companies, credit unions, etc. – send updates to each of the credit reporting bureaus, usually once a month. These updates include information about how their customers use and pay their accounts.

How to repair my credit and improve my FICO Scores

It's important to note that repairing bad credit is a bit like losing weight: It takes time and there is no quick way to fix a credit score. In fact, out of all of the ways to improve a credit score, quick-fix efforts are the most likely to backfire, so beware of any advice that claims to improve your credit score fast. The best advice for rebuilding credit is to manage it responsibly over time. If you haven't done that, then you need to repair your credit history before you see credit score improvement. The tips below will help you do that. They are divided up into categories based on the data used to calculate your credit score. Knowledge is Power and Credit is King! Call 18004421591 - Gaining Financial Stability with Intelligence and Integrity!

90% of top U.S. lenders use FICO® Scores when making lending decisions When you apply for credit—whether it's for a credit card, car loan, mortgage or other type of credit—lenders will want to know your credit risk. That is, they'll want to know how likely you are to pay back your credit obligations as agreed. To help them understand your credit risk, lenders use FICO Scores. FICO Scores help lenders quickly, consistently and objectively evaluate potential borrowers' credit risk. So when you apply for credit or a loan, there’s a very good chance your lender will use your FICO Scores to help them decide whether to approve you, and what terms and rates you qualify for. Different lenders use different versions of FICO® Scores You have more than one FICO Score—depending on what type of credit you're seeking, your lenders may evaluate your credit risk using different FICO Score versions. Auto lenders, for instance, often use FICO® Auto Scores, an industry-specific FICO Score version that's been tailored to their needs. Most credit card issuers, on the other hand, use FICO® Bankcard Scores or FICO® Score 8. It's also important to note that for most credit evaluations—such as a credit card application—lenders will use a FICO Score from just one of the three credit bureaus. For a mortgage or home equity loan application, however, lenders usually take into account a FICO Score from each of the three credit bureaus. Knowledge is Power and Credit is King! Call 18004421591 - Gaining Financial Stability with Intelligence and Integrity!