Five Core Factors Make Up Your Credit ScoreYour FICO score is made up of five factors, and different percentages make up each criterion. When applying for credit, these factors are important. The five factors that impact your credit are:
- Diversification of Credit
- Inquiries & New Credit
- Credit History Length
- Credit Utilization
- Payment History
Credit Reports and Credit Scores are DifferentA credit report will list every piece of your financial history that affects your creditworthiness. This can be helpful when you want to review your credit history and find the inaccuracies, fraud, or just general curiosity. Your credit score is the numerical grade of your creditworthiness. The purpose of checking your credit score is to get a quick snapshot of your score, giving you the knowledge of where you stand before you start house hunting at the Lake of the Ozarks.
Negative Credit Items Are Not Negative ForeverDid you know that most negative items will remain on your report for seven years at the most? This is due to the regulations set by the Fair Credit Reporting Act. However, bankruptcy can last up to 10 years or more in some cases.
FICO Credit Scores Can Range from 300 to 850A credit score can range depending on the credit bureau, but knowing your score can help you understand what needs to be done to improve it. A “good” score ranges from 680 to 739, anything below that could be “poor” or “fair”, and anything above it could be “very good” or “exceptional”. There are things you can do to improve your score, so knowing where you sit can tell you how much you need to do to get to your next goal.
FICO Scores Are Important and Used By Many LendersThe FICO credit scoring system was founded in 1956 by Bill Fair and Earl Isaac. The purpose behind it was to help lenders make well-informed lending decisions. FICO analyzes scores from the three major bureaus: TransUnion, Equifax, and Experian. In fact, 90% of lenders use your FICO score when making their lending decisions.
You Have Several Credit ScoresDid you know that your credit score can vary based on the credit bureau reporting them? The major bureaus all have slightly different information regarding credit history. It seems confusing, but there are also different scores specific to particular industries. An example would be that auto lenders review different risk factors than mortgage lenders, so the scores that each lender receives can vary. Some of the factors that affect your credit score could be the entities that report your credit, the time that the score was reported, the scoring model that is used, and the type of credit you are applying for.
True or False: Checking Your Own Score Will Hurt Your CreditFalse! There is a myth running around that if you check your credit score or order a credit report, that you will hurt your credit. Those “soft” inquiries should not affect your credit. Hard inquiries, like when a lender looks at your credit can negatively impact your score. Just remember that the consequences are not strong, and they are temporary.
When it comes time to secure a mortgage at the Lake of the Ozarks, your credit score is an important factor. There are several programs available to help borrowers better their credit score. A solid credit score lends to more financing options when preparing to buy a home. For more information on how your Lake of the Ozarks mortgage lender can help you purchase your dream home, give me a call at 573-746-7211.
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Senior Loan Officer
NMLS #: 493712
4655 B Osage Beach Parkway
Osage Beach, MO 65065
**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.