Joe Manifesto - Real Estate Financing Western Heritage Financial
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Main Title (Joe Manifesto Real Estate Services)

 SPECIALIZING IN DUBLIN, LIVERMORE, SAN RAMON, & PLEASANTON REAL ESTATE

CREDIT SCORE & GENERAL INFORMATION

OVERVIEW OF CREDIT SCORING FOR ALL THREE CREDIT BUREAUS

The 3 national credit bureaus systems in the United States are Equifax, Experian, and Trans Union. Experian was formerly known as TRW.  A FICO score is a credit score developed by Fair Isaac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills.  FICO Scores are calculated from the complete credit history data in your report. This data can be grouped into five categories as outlined below.  Out of the 3 scores, the middle score is used by lenders in determining your qualifying rate and program. One of the major factors considered when determining qualification for a loan is your credit score. Credit scores range from a low of 375 to a high of 900 points. The higher your score, the better. Your credit score measures the following.

Credit Report

PAYMENT HISTORY

  • Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)
  • Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)
  • Severity of delinquency (how long past due)
  • Amount past due on delinquent accounts or collection items
  • Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any)
  • Number of past due items on file
  • Number of accounts paid as agreed

AMOUNT OWED

  • Amount owing on accounts
  • Amount owing on specific types of accounts
  • Lack of a specific type of balance, in some cases
  • Number of accounts with balances
  • Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
  • Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

LENGTH OF CREDIT HISTORY

  • Time since accounts opened
  • Time since accounts opened, by specific type of account
  • Time since account activity

NEW CREDIT

  • Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
  • Number of recent credit inquiries
  • Time since recent account opening(s), by type of account
  • Time since credit inquiry(s)
  • Reestablishment of positive credit history following past payment problems

TYPES OF CREDIT USED

  • Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)
credit-report-ch

Please note that:

A score takes into consideration all these categories of information, not just one or two.
No one piece of information or factor alone will determine your score.

The importance of any factor depends on the overall information in your credit report.
For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your score. Thus, it's impossible to say exactly how important any single factor is in determining your score - even the levels of importance shown here are for the general population, and will be different for different

credit profiles. What's important is the mix of information, which varies from person to person, and for any one person over time.

Your FICO score only looks at information in your credit report.
However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting.

Your score considers both positive and negative information in your credit report.
Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

A FEW TIPS ON HOW TO IMPROVE YOUR CREDIT SCORE

It's important to note that raising your score is a bit like losing weight: It takes time and there is no quick fix. In fact, quick-fix efforts can backfire. The best advice is to manage credit responsibly over time. See how much money you can save by just following these tips and raising your score.

Payment History Tips

  • Pay your bills on time.
    Delinquent payments and collections can have a major negative impact on your score.
  • If you have missed payments, get current and stay current.
    The longer you pay your bills on time, the better your score.
  • Be aware that paying off a collection account will not remove it from your credit report.
    It will stay on your report for seven years.
  • If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.
    This won't improve your score immediately, but if you can begin to manage your credit and pay on time, your score will get better over time.
  • Amounts Owed Tips
  • Keep balances low on credit cards and other "revolving credit".
    High outstanding debt can affect a score.
  • Pay off debt rather than moving it around.
    The most effective way to improve your score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.
  • Don't close unused credit cards as a short-term strategy to raise your score.
  • Don't open a number of new credit cards that you don't need, just to increase your available credit.
    This approach could backfire and actually lower score.
  • Length of Credit History Tips
  • If you have been managing credit for a short time, don't open a lot of new accounts too rapidly.
    New accounts will lower your average account age, which will have a larger effect on your score if you don't have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.

New Credit Tips

  • Shopping for rates with different lenders can bring down your credit score
    FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur. If you do shop for rates with different lenders you could bring up many inquiries on your credit since each lender you shop at will pull your credit.  Because we are a mortgage banker we are capable of shopping the rate for you without the side-affects of having many lenders inquire about your credit.
  • Reestablish your credit history if you have had problems.
    Opening new accounts responsibly and paying them off on time will raise your score in the long term.
  • Note that it's OK to request and check your own credit report.
    This won't affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.

Types of Credit Use Tips

Credit Cards
  • Apply for and open new credit accounts only as needed.
    Don't open accounts just to have a better credit mix - it probably won't raise your score.
  • Have credit cards - but manage them responsibly.
    In general, having credit cards and installment loans (and paying timely payments) will raise your score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.
  • Note that closing an account doesn't make it go away.
    A closed account will still show up on your credit report, and may be considered by the score.

Please send E-mail to joemanifesto@gmail.com with questions or comments about this site.

Main Line: 510-331-1746                  Fax:  925-803-8373                     Twitter:  @JosephManifesto

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Equal Housing Opportunity Broker/Realtor

7405 Kenwood Road, Dublin, CA 94568

A Member of Bay East Association of Realtors  ----  BRE# 01395914

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