Credit Score Secrets Revealed

The Use of Credit Scores Give More Credit Opportunities

Lenders who use credit scoring are likely to approve more loans. They can identify borrowers who, even with past problems, may perform well in the future. The use of credit scores gives lenders confidence to offer credit to more people since they have a better understanding of the risk they are taking on

Credit Problems From The Distant Past Are Mitigated

The Credit score system that is used today reduces the impact of old credit problems. According to FICO, the new scoring system balances all credit information, good and bad, in developing a credit score. This new credit scoring system allows individuals with preceding credit problems to purge those issues from their credit score more quickly.

FICO’s own information, however, shows us that a good credit history can turn bad much faster than a bad one recovers, no matter how limited the time period. Most bad credit stays on record for at least seven years, a bankruptcy for ten. There is some evidence that lenders do not even assess information from before a bankruptcy – good or bad.

The Current System of Credit Scoring Makes Lending Quicker

Mortgage brokers and lenders now often seen meeting clients in more convenient locations to produce business and originate more loans. Many lenders will now come to your home carrying laptops loaded with loan origination software, allowing them to write loans in minutes. Credit scores have become integral in aiding lenders to make these quick credit decisions. This same credit scoring technology is utilized online loan sites such as the ING DIRECT Orange Mortgage that offers great rates and easiest application process I have ever seen.

Credit Scoring Levels The Loan Playing Field

Credit scores are immune to bias due to gender, race, religion, marital status, or national origin. In addition, credit scoring aids in screening out any other subjective lending factors based on these or other biases that a lender may have.

Scoring Makes Rates Lower

It’s True!

Automated credit rating programs make lending decisions more cost efficient and many companies pass these cost savings on to borrowers to make the loan products more price competitive. This process often results in lower mortgage rates (for example) in the U.S. than in Europe.

Quick Steps To Develop A Good Credit Score

That brings us to the topic of how a good credit score can do for you and what a bad credit score can do to you.

FICO, on its website, www.myfico.com, provides a table, updated daily, of mortgage rates that one might expect based on a FICO score. This table provides a good visual example of the rate spread that one might see when applying for a mortgage or another type of personal loan – a car loan or a new credit card for instance.

Back in March, FICO provided rate estimates for a 30 year-fixed $150,000 home mortgage:

FICO Score	Interest Rate	Monthly Payment
720-850	5.59 %	$860
700-719	5.71 %	$872
675-699	6.25 %	$924
620-674	7.40 %	$1,039
560-619	8.53 %	$1,157
500-559	9.29 %	$1,238

The Value of A Good Credit Score

As we can see, there is tangible value in a person’s credit score. A $378 spread between good credit and poorer credit is a serious motivator to maintain a good credit score. It is a monthly payment difference that can make the dream of owning a home unattainable for some or, it can make the difference between owning your dream home or settling for a house that will do for now.

Essential Tips Credit Rehabilitation

First things first; if you don’t have credit then you can’t have a good credit score.

In order to establish some credit the most efficient process to go through it to Apply for an easy-to-get credit card that is great for beginners like the Discover® Open Road Card and use it – wisely. Use your new credit card for a few purchases each month, gas and groceries are common items for credit purchases, and pay off the bill immediately.

If you do not have any credit you may have to pay an annual fee to the credit card company, but this is the cost of building a good credit score. If you continue the cycle of charging a little and paying off the full balance each month, you will likely be able to have the annual fee lowered or removed. If not, apply for a new credit card with no annual fee.

How To Keep A Good Credit Score

If you have established credit, it is essential to continue to pay every single bill on time.

If you find yourself behind in payments, catch up immediately or contact the creditor and make arrangements to do so then be diligent in keeping that account current. There is some evidence that late payments as short as 30 days can leave a mark on your credit report.

Maintain Low Balances

Any time a borrower has used the entire line of credit, especially on more than one credit account, it puts the borrower’s financial stability under scrutiny and this extreme use of credit is often reflected in a lower credit score.

The Impact of Credit Inquiries

If you are shopping for a loan or mortgage, do so in a short time period. The method in which a credit score is calculated can identify someone searching for a single loan (over a short time period) and someone who is always searching for more credit. This is based solely on the time frame in which creditor make inquiries regarding your credit.

Check Your Credit Report Often

It is vitally important to check your credit history report as many as several times a year to make sure the information being reported is correct. Often there are mistakes on ones credit report that may be able to be remedied with a simple phone call. It is very difficult to correct a credit problem and build a good credit score, if you do not know the reasoning for a poor credit score.

Everyone should get a report from each of the three reporting agencies every year.