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Know Your Credit Score
Know Your Credit Score A major reason why you as a borrower can receive a mortgage, credit loan, credit card or shopping card almost immediately is because of a credit scoring system. In the 1950's when credit cards where just beginning, there was a need to establish a system to easily determine the credit of individuals to whom a credit card might be issued. Bill Fair and Earl Isaac had anticipated the need for credit review in 1956 when they founded their corporation Fair Isaac Company. About the same time, Conrad Hilton of the future Hilton Hotels was preparing to launch it's Carte Blance credit card, the first in the credit card concept. Not until 1958 did Fair and Issac successfully build the first credit scoring system. Now more than fifty years later, the world receives the benefits of Fair and Issac's credit concept of credit scoring. Lenders are willing to make an immediate loan decision on you as a borrower because of your credit score. Fannie Mae and Freddie Mac use credit scoring to predict your ability to repay a loan as do most banks, credit unions, mortgage companies, department stores, and internet companies. Credit scoring uses large statistical samples to predict how likely a borrower, you, will pay back the loan. The credit score model selects a random sample of borrowers and analyzes the characteristics of creditworthiness. Each characteristic is assigned a weight based on that characteristic to predict. Credit scoring is blind to demographics or cultural differences, thus provide an objective standard scoring to everyone. The Fair Issac credit scoring system is still the primary method of credit scoring. "FICO" which stand for Fair Issac Corp is what you are often asked. "What is your FICO?" Your FICO is a score ranging from 400 to 900, and it scores your risk to repay a loan. The lower your score, 600 and below, the less likely you will repay. The higher your score, 700 and above the more likely you will receive the loan you are seeking. Knowing your FICO score may determine who you would wish to submit an application to for a loan. Knowing how your FICO score was weighted, will help you rebuild your credit for future loans and credit. The FICO determines a credit score as follows: 35 percent payment history on credit accounts with more weight on recent payment history than past. 30 percent debt outstanding with all creditors to include mortgages, credit cards and shopping cards. 15 percent length of time using credit and timeliness of repayment, longer is better and quick payment is better. 10 percent activity of seeking credit in recent history, where too many applications for credit will hurt your score. 10 percent on the types of credit used, including installment loans (cars, boats or high ticket items) leases, mortgages, and credit cards of any type. To help increase your personal credit score, it is important to know that this is a long-term process. You did not achieve your credit score over night and you will not change your credit score quickly either. If your credit score changes too quickly, then your credit score will be flagged as a possible problem. Use some or all of the following to help you build you credit score to a better credit score: Pay your bills on time. Failure to pay on time and the correct amount can have a serious impact. Frequently applying for any credit showing up on credit score report will hurt your credit score. Don't "max-out" your credit limits if you wish to raise your credit score. Establish a history of obtaining credit even when you may not need the credit. Not having a need for credit can impact your credit score. Credit scoring systems are changing. As residential home lending takes on the auto and consumer lending model, expect that your credit score from any number of models will be applied. Your future score may be the difference of your getting "5.25 percent loan for A+ or a 6.5 percent loan for a B-." VantageScore was introduced in 2006 by the three credit-reporting agencies, Equifax, Experian, and TransUnion. The VantageScore systme grades from "A (best) to F (worst)" as a means of determining your credit score.
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Know your ability to borrow and get credit loans will determine your shopping for credit. If you are quoted a higher-than-market rate you should shop for a lender with better terms. Just remember don't make an application until you are sure you can qualify, each application could hurt your credit score and your chances of receiving future loans. Research From:
http://www.fairisaac.com/fic/en
http://www.hsh.com
http://www.fanniemae.com
http://www.freddiemac.com
http://www.hud.govloffices/hsg/sfh/insured.cfm
http://www.federalreserve.gov
http://www.fte.gov/
http://www.va.gov/
http://www.vantagescore.com/
http://www.equifax.com/freeficocreditscore/?CMP=KNC-Yahoo&HBX_PK=equifax&HBX_OU=51
http://www.experian.com/
http://www.truecredit.com/?bn=15&kw=8094&ef_id=1507:1:1f57e43eb5d58dd4c340b0d373d0d85d_... zzzzz
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This intel was contributed by The MUSEUM
The MUSEUM
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May, 2012
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