Myths and Misconceoptions of Credit Scoring - Part 3 of 3

       
MYTHS AND MISCONCEPTIONS OF CREDIT SCORING - PART 3 OF 3  

Jamie Preidt, Branch Manager

www.AlliedMortgageCharlotte.com  

    In part 3 of of our credit scoring series, we will examine Credit Score Factors and credit scoring contacts.  This credit scoring series is brought to you by Exit Home Team Realty of Statesville North Carolina and Allied Home Mortgage Capital Corporation.    

  There are five main categories of information that credit scores evaluate.  They are listed in order of importance and weight of impact on your credit score.  

• Payment History - Approximately 35% of your score is based on this category. 
  • Payment information on accounts such as Visa, Mastercard, American Express and Discover; retail department store accounts; installment loans; finance company accounts and mortgage loans.
  • Public record and collection items such as bankruptcies, foreclosures, wage attachments, liens, judgments and delinquencies reported to collection agencies.
  • Details on late or missed payments (delinquencies) and public record and collection items, specifically focusing on how late they were, how much was owed, how recent and frequency of the occurrence.
  • How many account show no late payments.
•  Amounts Owed - Approximately 30% of your score is based on this category.
  • The amount owed on all accounts.
  • The amount owed on different types of accounts.
  • Whether you are showing a balance on certain types of accounts.
  • The number of accounts with balances.
  • How much of the total credit line is being used on credit cards and other revolving credit accounts.
  • How much of the installment loan accounts is still owed, compared with the original loan amounts.
• Length of Credit History - Approximately 15% of your score is based on this category.
  • How long your credit accounts have been established.  The score considers both the age of your oldest account and an average age of all your accounts.
  • How long specific credit accounts have been established.
  • How long it has been since you used certain accounts.
• New Credit - Approximately 10% of your score is based on this category.
  • How many new accounts you have.
  • How long it has been since you opened a new account.
  • How many recent requests for credit you have made, as indicated by inquiries to credit reporting agencies in connection with transactions initiated by you.  The score does not take into account requests a creditor has made for your credit file or score in order to make a pre-approved credit offer, or to review your account with them, nor does it take into account your request for a copy of your own credit file.
  • Length of time since creditors made credit file inquiries.
  • Whether you have a good recent credit history, following past payment problems.
• Type of credit use - Approximately 10% of your score is based on this category.
  • What kinds of credit accounts you have and how many of each.

  As a consumer, you have the right to have credit bureau file be reported accurately.   There are three major credit bureaus: 

Experian: www.experian.com 888-397-3742  

Transunion: www.tuc.com Transunion Consumer Solutions PO Box 2000 Chester, PA 19022-2000  

Equifax: www.equifax.com PO Box 740241 Atlanta, GA 30374  

  If you are denied credit at any time, your lender must notify you within thirty days of the reason for credit denial.  They must also provide you with the name and contact information of the credit repository used in the credit decision.   You can then contact the credit bureau and request a free copy of your credit file in order to review it and its accuracy.  Upon finding any erroneous information, you can then request the bureau validate the inaccuracies.  They have thirty days to confirm the information and correct or delete any errors on your file.    

• That a credit score predicts the likelihood that an applicant will have a 90 day late in the next 24 months.
• Most negative credit must be removed from credit bureau files after 7 years.  Exceptions include bankruptcy which can continue to appear on reports for up to 10 years.
• Inquiries remain for 2 years.
• Paid off accounts without negative information remains for up to 10 years.
• The average credit score in the USA is 686 while the mean score is 720.
• There must be activity within the past 6 months to post a credit score.
• The typical credit scoring models uses these factors:
  1. 35% Past Payment History - model looks at last 24 months w/most recent 6 being most important
  2. 30% Balances - revolving credit balances are compared to high credit.
  3. 15% Credit History - how much credit has been obtained historically.
  4. 10% Inquiries - Mortgage and auto inquiries pulled within 30 days count as one.  After 7-10 inquiries within 12 months there is no impact on the score.
  5. 10% Types of Credit - Mortgage debt is weighted most heavily and finance company debt is viewed negatively.

 Statesville NC Real Estate, Statesville NC Sonya Leonard of Exit Home Team Realty is your local real estate expert in Statesville North Carolina.  Specializing in working with buyers and sellers of Residential homes and land.  The Statesville Real Estate Guide provides free access to individualized home searches for all homes in Statesville, Mooresville, Troutman, Lake Norman and the entire Lake Norman Area.  Explore buyer and seller reports, community resources, new home communities and be sure to sign up for your personal home search.  Let Sonya help you INVEST in Real Estate and you Future!