Credit Score
Understanding Your Credit Score

Understanding Your Credit Score

 Understanding Your Credit Score | Correcting Errors on Your Report | Credit Bureau Contact Information

When you're applying for a mortgage, your credit score is a major factor in the application approval process and in the interest rate you receive. A higher score may increase your chances of approval and a favorable interest rate, but how is your score decided?

Most companies use a FICO credit score that is decided by five elements.

Your Payment History – 35%
Late payments affect your score negatively. Be sure to pay all of your credit accounts on time.

How Much You Owe – 30%
Your FICO score is influenced by how much you owe on all of your accounts, the number of accounts with balances and how much of your available credit you are currently using. The more you owe in comparison to your credit limit, the lower your score will be.

Length of Credit History – 15%
While a short credit history may not necessarily negatively impact your score if the rest of your credit report shows responsible credit management, a longer history will increase your score.

New Credit – 10%
Be cautious of credit inquiries. Any time there is an inquiry into your credit, it negatively affects your score. This includes companies that advertise free credit reports; the only government-approved website for requesting your credit report is www.AnnualCreditReport.com. This website allows one annual credit check with no affect to your credit score. Additionally, while shopping for a mortgage loan, you may have as many inquiries as you like within 30 days, and they will only count as one.

Other Factors – 10%
A number of other smaller factors can influence your score. For example, having a variety of credit types on your report, such as credit cards, mortgage loans, auto loans or personal lines of credit, can be indicative of a long credit history and lead to a slightly higher score.

What's a good score? 
FICO scores range from 300 to 850, with higher numbers being better. A score of 700 is a good indicator of financial health, and most lenders prefer scores at or above that number.

Correcting Errors on Your Report

The Fair Credit Reporting Act (FCRA) gives you the right to dispute the accuracy of information found on your credit report. If you discover errors on your report:

  1. Contact the credit bureau that is reporting the erroneous information.
  2. Request a copy of your credit report directly from them.
  3. Register your disputes directly with the credit bureau(s) reporting the information.
  4. Follow the credit bureau's procedures for disputing information and be prepared to provide written evidence to back up your claim if necessary.
  5. Follow up with the bureau(s) within 30 to 60 days to verify the information has been corrected.

The bureau is obligated to correct any information determined to be erroneous or incomplete. Any claim that cannot be verified must be deleted under the rules of FCRA. Any correct negative information that is validated will remain on your credit report.

Credit Bureau Contact Information

Experian Consumer Relations
PO Box 2002
Allen, TX 75013
888.397.3742
www.experian.com

Equifax Consumer Relations
PO Box 740241
Atlanta, GA 30374
800.685.1111
www.equifax.com/fcra

TransUnion Consumer Relations
PO Box 1000
Chester, PA 19022
800. 916.8800
www.transunion.com/myoptions

 

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