Credit
Score
A
single numerical score, based on an individual's credit history, that
measures that individual's credit worthiness. Credit scores are as good
as the algorithm used to derive them. The most widely used credit score
is called FICO for Fair Issac Co. which developed it.
The
most notable and widely known credit score is called the FICO
score. FICO is an acronym for Fair
Isaac Company. Fair Isaac is the company who came up with the formula
for the score.
The
higher the FICO score, the better the chance are that a borrower will
make their payments on time.
FICO
scores range from 350 to 850. The minimum score to qualify for the lowest
rate would be 740. This does vary from lender
to lender, and is dependant upon all of the information provided by the
borrower
to the lender.
Credit
scores have done wonders for speeding up the loan decisioning process.
The only down side to the credit reports and fico scores is the possibility
of an error. For instance, if someone with a similar name has one of their
accounts show up on your credit report, this can and will affect your
credit score. Errors
on credit reports are not at all uncommon.
Will
Time Improve My Credit Report?
The
Federal
Fair Credit Reporting Act sets limits on how long derogatory
information can appear on your credit report. Once a record has been on
an individuals credit report for the subscribed period of time, it is,
by law, supposed to drop off.
Before
negative information drops off of your credit report, it will continue
to have a negative impact on your score.
This is why it is important for borrowers to establish new credit where
the outcome will have a positive impact on their report.
This will help your credit score begin to rise. By letting your derogatory
accounts sit around on your credit report without establishing new and
active credit accounts you are only hurting your score.
Do
Credit Inquiries
Hurt Your Credit Score?
Generally
speaking, credit inquiries will hurt your credit score because it has
been found that multiple
inquiries are a red flag when it comes to a high risk of default.
However,
multiple inquiries can happen as a result of someone shopping around for
the best deal. Credit scorers do take this into consideration. Credit
scorers do not pay attention to auto and mortgage inquiries that happen
within thirty days of the scoring date.
Also,
to avoid hurting the borrower’s score from any earlier shopping
that the consumer may have done, the credit scorers will treat all auto
and mortgage inquiries that occur within a fourteen-day period as one
single inquiry.
The
only inquiries that affect your credit score are those by new credit grantors
to whom you have given authorization
to do so.
Credit
Report
Equal
Credit Act
Debt
Consolidation
Buying
House with bad credit
Refinancing
house with bad credit
Credit
Problems, What You Can Do
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