Your CREDIT SCORE
Why Your Credit Score is So Important
The credit scoring model seeks th qualify the likelihood of a consumer to pay off debt without being more than 90 days late at any time in the future. Credit scores can range between a low score of 350 and a high score of 850. The higher the score, the better it is for the consumer, because a high credit score translates into a low interest rate. This low rate, can save you thousands of dollars in financing fees over the term of the loan.
Only about 1 in 1,300 people in the US have a credit score above 800. These folks with this rating get the best rates on the market. On the other hand, one out of every eight prospective buyers is faced with the possibility that they may not qualify for a home loan they want because they have a score falling between 500 and 600.
Mortgage lenders consider a score of 700 or above to be very good. Some examples of the rates obtainable are these: 500-559 credit rating would most likely fall in the 9.29% rate, 560-619 8.53%, 620-674 7.77%, 675-699 6.26%, 700-719 6.08%, and 720-850 in the 5.95%.
Five Factors of Credit Scoring
1 - PAYMENT HISTORY - 35% IMPACT - Paying debt on time and in full has the greatest positive impact on your credit score. Late payments, judgements, and charge-offs all have a negative impact. Missing a high payment will have a more severe impact than missing a low payment, and delinquencies that have occurred in the past two years carry more weight than older items.
2 -OUTSTANDING CREDIT BALANCES - 30% IMPACT - This factor marks the ratio between the outstanding balance and available credit. Ideally, the consumer should make an effort to keep balances as close to zero as possible, and definitely below 30% of the total available credit when trying to buy a home.
3 - CREDIT HISTORY - 15% IMPACT - This portion of the credit score indicates the length of time since a particular credit line was established. A seasoned borrower will always be stronger in this area.
4 - TYPE OF CREDIT - 10% IMPACT - A mix of auto loans, credit cards, and mortgages is more positive than debt of credit cards only.
5 - INQUIRES - 10% IMPACT - This percentage of credit score quantifies the number of inquires made on a consumer's credit within a 6 month period. Each hard inquiry can cost from 2 to 25 points on a credit score up to 10 inquires. In other words, 11 or more within the 6 month period will hace no impact.
Please remember the the credit score is a computerized calculation. Personal factors are not taken into consideration when a credit report is generated. It's merely a snapshot of today's credit profile.
