The Three Components That Have The Biggest Impact On Your Credit Score.

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Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Because Credit Scores are playing such a major part in Loan Programs these day, both in qualifying and Closing Costs, I will wrap up this little mini series of blogs on Credit by just highlighting The Three Components That Have The Biggest Impact On Your Credit Score. These three components are Credit History, Years of Credit, and Available Credit. The first two relate to time, and will take time to have for them to correct or improve a Credit Score, they are:

  • Credit History: Represents 35% of a Credit Score, and it is the history of how well you have paid your bills during the time you have had credit. However, late payments, charge offs, or collections that are over two years have very little impact on a credit score. In fact it is better to not pay off a collection that is over two years old, because that could actually bring down the score. That is because it will bring the last reporting date current again, and will now be reported as a late. That is a double edge sword, because most of the time these days you will need to payoff the collections in order to qualify for most of the Loan Programs.  Late payments can lower your Credit Score quickly, but it takes much longer to bring them back up by just simply paying your debts on time.
  • Years of Credit: Also know as length of credit. This simply is the number of years that you have had credit, the longer the number of years with good credit the higher the score. This represents 12% of a Credit Score. 

The third major component is one that can quickly raise or lower your Credit Score, and therefore a way that you can quickly increase your Credit Scores if needed.  This third major component is:

  • •Available Credit: Available Credit is just what it says, it is the amount of credit that is available to you. For example the number of credit cards you have, and how much of the credit limit on the cards are still available to you. If you are over 30% of the available credit on a credit card it has a negative impact on your credit. If you are over the Credit Limit it has an even bigger negative impact on your credit. So a quick way to improve your credit is pay down your credit cards to less than 30% of the Credit Limit. This has a huge quick improvement on your scores, and it represents 30% of your Score.

There you have it.  After reading these three blogs you should all be experts :)

Well maybe not experts but at least much better prepared to take action in regards to your Credit if you have to.

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Who To Call For Your Mortgage Needs In Connecticut:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who is licensed in #CT, #RI, #MA, #NH, & #FL and can assist you with all your #FHA, #Conventional, #VA, #USDA, and #State Bonded Progam #mortgage needs in #CT, #RI, #MA, #NH, & #FL. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@snet.net

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Rainmaker
156,304
Carolyn Kolba
Serving Mentor, and all of Lake County, Ohio - Mentor, OH
Keller Williams Realty- Mentor, Ohio

I think it is also important to remember that totally paying off a credit card is NOT better than having an ongoing balance of about 20% to 25% of your available credit line, and then making a payment every month, rather than having no balance, and consequently not showing that you are capable of making regular on-time payments.

Apr 26, 2011 12:30 PM #1
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Celeste "SALLY" Cheeseman
Liberty Homes - Mililani, HI
(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

I'm halfway there...but still no expert compared to you George. You definitely serve your clients well!

Apr 26, 2011 12:35 PM #2
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
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Carolyn you are right especially for a young person who is trying to show a positive payment history.

Sally that means a lot from someone who I know serves her clients extremely well :)

Apr 26, 2011 12:42 PM #3
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Ed Silva
RE/MAX Professionals, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

Well done George, as credit scores are so integral to a person's ability to secure a loan, they should at least know how to properly maintain them, and also how their transgressions with money have affected them.

Apr 27, 2011 12:17 AM #4
Rainer
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Diane Rice
Rice Prprty Mgmnt & Rlty, LLC, South Holland, IL - Lansing, IL
SFR, SRES, CNC

Hi George - What we have to watch out for here are fraudulent credit reports - We have seen these come from REALTORS attempting to secure rentals!  We will not accept a candidate without running the report ourselves now..... UNLESS we know it's from a reputable source!    As always, YOU post good information!

Apr 27, 2011 04:58 AM #5
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
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Ed, you are absolutely right, and the more awareness they have the better they will be at doing both of those things.

Diane, if a Borrower does not let me run their credit, because they have had their credit run by another Lender or ran it themselves, the conversation is over until they let me run my own.  Approving someone for a loan is to serious to go on hear say, I have to see it myself.  Also I need to pull the credit report so that it attaches to the Loan Application.  Without doing that I can not run it through the Automated Underwriting System.  Every time someone tells me that they have great great, but does not let me look at it, it always ends up not being great credit.

Glad to see the follow the same practice of looking at it yourself. 

Apr 27, 2011 07:58 AM #6
Rainmaker
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Ann Hayden
Berkshire Hathaway HomeServices Select Properties-St. Louis Missouri - Chesterfield, MO
SelectAnn.com

George,

Great info!

Ann hayden in Wildwood, MO

Apr 27, 2011 04:00 PM #7
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Ann thank you.

Apr 28, 2011 01:53 AM #8
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

George - this was a terrific article. I linked to it from my AtHomeInCarlsbad.com blog. Good job!

Jeff

Apr 28, 2011 01:11 PM #9
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