Whats in a credit score? - The information that impacts a credit score varies depending on the score being used. Credit scores are only affected by elements in your credit report, such as:
* Number and severity of late payments
* Type, number and age of accounts
* Total debt
* Recent inquiries
If a business card/corporate card or gas card does not appear on your credit report, it will not affect your score.
Credit scores do not consider:
Your race, color, religion, national origin, sex or marital status. U.S. law prohibits credit scoring from considering these facts, as well as any receipt of public assistance, or the exercise of any consumer right under the Consumer Credit Protection Act:
* Your age
* Your salary, occupation, title, employer, date employed or employment history. However, lenders may consider this information in making their approval decisions.
* Where you live
* Any interest rate being charged on a particular credit card or other account
* Any items reported as child/family support obligations or rental agreements.
* Certain types of inquiries (requests for your credit report). The score does not count "consumer disclosure inquiry” requests you have made for your credit report in order to check it. It also does not count "promotional inquiry" requests made by lenders in order to make a "pre-approved" credit offer – or "account review inquiry" requests made by lenders to review your account with them. Finally, inquiries for employment purposes are not counted.
One major impact on your credit score is how much in debt you have versus how much of a limit you have on your debt. It is ideal to keep your revolving debt balances at 20 to 40 percent of your credit limits to help maximize your credit scores.
Should I close my credit cards if I have a lot? - You should never close your credit cards, even if they have a zero balance on them because the credit cards and the time it has been established provides history on your credit report. Closing a credit card that has a balance on it lowers your total debt to available balance ratio which can in turn affect your credit score. If you have multiple cards, try to pay down the one with the highest interest rate first but NEVER close your credit card because you will never be able to re-establish the existing history of the trade line.
However recent studies by credit reporting agencies show having too many open credit accounts will negatively affect your credit as well, the key to developing good credit is one of balance having a reasonable amount of credit to go along with your financial lifestyle. Also noted is that credit lenders are shying away from basing their approvals and rates on credit score alone and beginning to look at the bigger picture such as payment history, length of credit etc.
Will selling current home improve your credit? - It depends if you paid your mortgage on time while in your home. If you were late then it will be in the history on your credit report. The creditors history makes up 35% of the credit report
Selling your home may also be required before you can buy another home, unless you can show the bank lending you money for the second home that you can afford to make payments and upkeep on both homes at the same time.
How credit scores are calculated? - Designers of credit scoring models review a set of consumers – often over a million. The credit profiles of the consumers are examined to identify common variables they exhibited. The designers then build statistical models that assign weights to each variable, and these variables are combined to create a credit score.
Models for specific types of loans, such as auto or mortgage, more closely consider consumer payment statistics related to these loans. Model builders strive to identify the best set of variables from a consumers past credit history that most effectively predict future credit behavior.
The three major credit bureaus, Experian, Equifax, and Trans Union all use their own unique scoring models. Most lenders will look at all three of your credit bureau reports and scores, commonly referred to as a tri-merge report. The difference between the three credit bureau scores can be significant due to the different scoring models that each bureau uses.
Most lenders will use the middle of the three credit bureau credit scores when reviewing your loan application file. There are some exceptions. If you would like more information about the alternative programs, please call me at 888-418-4467.
Each credit repository, Equifax, Experian, and TransUnion, all update their credit scoring models every now and then. Just like with a computer and its operating system such as Windows 95, Windows 2000, Windows XP, etc... the credit bureaus update their technology and their scoring models as well. Not all lenders use the same models for each different credit bureau. Some lenders use older models because they are usually cheaper while others use the most updated model. This is one reason why there are sometimes discrepancies or variances from lender to lender on actual credit scores.