What Do Lenders Look For In Your Credit?

August 19, 2012 at 3:51 pm Leave a comment

What makes a credit score?
Payment History: 35% impact. Paying debt on time such as utility bills, mortgage, credit card bills, car payments have a positive impact. Late payments, judgments and charge-offs have negative impact. The newer the delinquencies, the stronger the impact.

Outstanding Credit Balances or Amount owed: 30% impact – This factor is determined by the outstanding balance vs available credit. Make an effort to keep balances as close to zero and definitely below 30% of the available credit limit when planning to loan within 3-6 months. So, if you have $2,000 available credit in your credit card, keep your outstanding balance or what you owe to under $600 or 0 if you can.

Length of Credit History: 15% Impact – this is determined by the length of time a particular credit line was established. Maintaining a long and paid up credit history with a credit card company is considered “gold” in achieving a high credit score.
Caution: If you plan to reduce the number of credit cards you have. Start with those with the shortest credit history or the newest credit cards.

Type of Credit: 10% Impact – A mix of auto loans, credit cards, mortgages is more positive than a concentration of debt from credit cards alone.

Inquiries: 10% Impact – This quantifies the number of inquiries (or requests for credit) that have been made on a consumer’s credit history within 6-12 month period. Each individual inquiry- up to 10 can hurt your credit score by as much as 5-30 points. Any additional inquiries thereafter will not affect your credit score.

In other words, don’t start the loan process until you’re ready to act. However, scoring models have been adjusted to count multiple “hard” inquiries within a 14-day period as a single inquiry. So, when you’re ready, your credit will be too.
Check your own score yearly by ordering reports from the three major credit scoring companies: Equifax (www.equifax.com), Experian (www.Experian.com) and TransUnion (www.tuc.com).

What to do if your credit report is inaccurate?
Notify the credit bureau of inaccuracies, along with copies of documents that dispute incorrect entries. Close accounts not in use. Request that late payments older than seven years be removed. Verify and update accounts and account numbers. Verify your address and Social Security number.

There are credit repair companies that dispute your credit entries for a fee or if you have the time and knowledge, you may do this yourself for free.

Entry filed under: Arizona Real Estate, Chandler Real Estate, Foreclosures & Short Sales, Phoenix Real Estate, Real Estate Deals. Tags: , , , .

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