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What Are Credit Scores - Why Are They Necessary?
This is an article on credit scores and what can affect them. This may help you get your file in order and improve your ranking to better your chances of getting an approval on your real estate loan application.
Credit scoring is a quick and accurate method for evaluating you as a credit risk. Credit scores are based on data in a credit repository about your credit history. You will get your credit scores and free credit report with any home loan applied for online.
Your credit scores are calculated by models that assign points to factors indicative of probability of repayment. These scoring models exist in software utilized by the credit bureaus. Credit scores are based on data rather than human judgment, making credit scoring an objective risk assessment tool, not a subjective, possibly discriminatory, human interpretation of your information.
Even the best and smartest underwriter cannot match scoring's statistical ability to weigh hundreds of factors and reach a number indicating relative credit risk in a matter of a few seconds. The resulting score is a "snapshot." It sums up what your past payment performance and current usage of credit say about your level of credit risk and repayment probability to the lender.
Because the score is a composite of all the applicant's credit information, no single factor like a late payment or a bankruptcy will be the sole cause of an unacceptable credit score. Credit scoring can be difficult to understand and explain to consumers in lay terms.
Listed below in order of importance are some factors that impact your credit scores:
1. Previous credit performance
Major delinquencies
Length of time since last delinquency
Judgments, bankruptcies or liens
2. Current level of indebtedness
Proportion of balances to credit limit
Total amount owed
Number of open accounts
3. Amount of time credit has been in use
Age of account
Length of time since account opened
4. Pursuit of new credit
Time since last account opened
Inquiries
5. Type of credit used
Number of revolving accounts
Number of finance company accountsIf you have any questions or concerns about your credit you may call any of the bureaus. You may also call us. We'd be happy to help.
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