CREDIT SCORING - WHAT EVERYONE NEEDS TO KNOW!!!

Reblogger Lora "Leah" Stern 914-772-4528
Real Estate Agent with Coldwell Banker, 170 N Main Street, New City NY 10956
https://activerain.com/droplet/44Pd

If you're thinking of buying a home and financing it via a mortgage then you need to be concerned about credit scoring - What effects it and how  each action you take can effects the overall picture.  Here's a great primer by Larry Bettag about the ins and outs of what makes up your basic credit score and some suggestions on what to do and NOT to do to protect that score and keep it UP.

Original content by Larry Bettag NMLS ID# 158606

DO NOT TRY THIS AT HOME

 

Credit is one of THE MOST IMPORTANT ISSUES IN getting a loan today. Time and time again, I'm called by a client who says "I PAY MY BILLS ON TIME, BUT MY PEOPLE SAY MY CREDIT STINKS.... Maybe I'll just pay off my credit cards today.....

No, No, No, No Nooooooooooooo!!!!!!

It just happened to me yesterday.....AGAIN!

 

Truthfully, there is more to a credit score than just making your payments on time or paying off your credit. In fact paying off all your credit today could be a bad move. Needless to say, I've broken this down so that the complexities of mortgage credit scoring can be understood by the consumer. I reference this a lot when consulting clients. With this information you can self-analyze your situation to make sure that you monitor your scores or raise your scores to where you want or need them. In other words, this serves as a roadmap to building a good credit report.

Here are all 5 factors in the order of importance:

1) Payment History has a 35% impact. Paying debt on time and in full has a positive impact, and late payments, judgments and charge-offs have a negative impact.

2) Outstanding Credit Balances have a 30% impact. Debt ratio of outstanding balance to available credit is important. Keeping that below 50% is wise and below 30% even wiser. It is never a good idea to close an account; the debt ratio will go up and the number of seasoned lines will decrease. Pay outstanding debt down as close to zero as possible and evenly redistribute the remaining balance among the open lines. The increased interest incurred by moving a balance from a 0% card to a 23% card will be minimal relative to what the increased mortgage debt might be with a low credit score. Hitting the maximums of available credit can be very negative. It may be worth calling and asking the credit company to increase your available credit to lower the debt ratio, provided they can do so without a hard credit inquiry.

3) Credit History has a 15% impact. The length of time a particular credit line has been opened is important. A seasoned borrower is stronger.

4) Type of Credit has a 10% impact. A mix of auto loans, credit cards and mortgages is positive, rather than a concentration in credit cards only.

5) Inquiries have a 10% impact. Hard inquiries for credit will negatively impact the score. Auto and mortgage inquiries receive special treatment and 20 inquiries can be made in a 14-day period for auto or mortgage and will be treated as only 1 inquiry. The maximum number of inquiries that will reduce the score is 10. Any inquiries beyond that [11+] in a six -month period will have no further impact on the borrower. Each hard inquiry can cost 2-50 points on a credit score. Make sense? It does to me. File this away in your back pocket. Every time you want to save 10% on the flashing blue light special for signing up for a new card....well...you may be paying a lot more than that with all of your other credit if your scores drop. Know your facts, call me if you want to talk further on how this may affect you.

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Topic:
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Groups:
The Lounge at Active Rain
1st Time Buyers
Mortgage Marketing Tips and Strategies
Buyer Information - What Buyers Need to Know in Today's Market
Advice for Buyers
Tags:
credit repair
credit scoring
how to improve your credit score

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Rainmaker
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Debbie Walsh
Shahar Management - Middletown, NY
Hudson Valley NY Real Estate 845.283-3036

Good reblog Leah.  I wish everyone would pay attention to things like this!!

Oct 08, 2013 06:14 AM #1
Rainmaker
503,046
Lora "Leah" Stern 914-772-4528
Coldwell Banker, 170 N Main Street, New City NY 10956 - New City, NY
Real Estate Salesperson

Debbie, don't we all.  Thanks for stopping by, my friend.

Oct 08, 2013 11:53 AM #2
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Rainmaker
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Lora "Leah" Stern 914-772-4528

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