Credit Reports
Your credit report contains credit
scores that can have a direct impact on the availability, and the terms of
a new mortgage, as well as other types of loans. The higher the scores, the better the
rates and terms.
For loans with a higher loan to value, credit
scores have an even greater effect.
Credit score information is provided
by three national bureaus: Transunion,
Equifax,
and Experian (formerly TRW),
which use a computer risk model to track how borrowers pay
their bills and identify payment patterns.
Credit scores are based on five
main categories of information.
1. Late Payments, Delinquencies,
Bankruptcy, Tax Liens, Foreclosure
2. Outstanding Debt - Ratio of balances to available credit
3. Length Of Payment History
4. New Applications For Credit (Inquiries)
5. Types of Credit in Use - Credit Card, Installment,
Mortgage, etc.
Credit scores are based on a person's whole credit picture. No
one factor determines a score. Your credit report is a
composite of both positive and negative information such as
missed loan payments, as well as loan accounts paid
satisfactorily. Issues that can carry the most weight are:
Payment Performance: The fewer
late payments, the better the scores. Payments that were 60 or
90 days late have more of a negative effect than a 30 day
late. The age of late payments can effect your credit scores,
more recent late payments are considered worse.
Credit Use: A large number of
accounts with balances can reduce your credit scores,
especially if the balances are high. Using 75% of your
available credit limit is a greater risk than using 25%.
Payment History: A longer payment history is better for
accounts on your credit report. Having recently opened a
new loan or credit card could reduce your scores, as well as
new inquiries.
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