Your Credit Scores Indicate the Likelihood That a Loan Will be Paid On Time
YOU HAVE DIFFERENT TYPES OF CREDIT SCORES
Since different types of creditors use different scoring formulas, you can’t compare online credit scores to scores obtained from a mortgage company, credit card, etc.
See an example of how someone can have different scores for different industries:
- Mortgage Score: 680
- Credit Card Score: 561
- Online Score: 594
- Cell Phone Score: 432
- Auto Score: 625
- Insurance Score: B+
KNOW THE SCORING FACTORS
MAKE PAYMENTS ON TIME
On-time payments are the foundation of good scores.
THE LAST 2 YEARS OF HISTORY
impact scores the most. The longer your payment history is, the more it helps your scores.
THE NUMBER OF OPEN ACCOUNTS
factors into your payment history. Ideally, you want 4 or more open accounts. (More in Step 3)
MORE ADVERSE ACCOUNTS
means lower scores. Newer adverse accounts hurt more than older ones. (More in Step 6)
DON’T MAX YOUR CARDS
Lenders think you’re a greater risk.
A NEW LOAN IS A NEW RISK
If your credit report doesn’t show much debt, a small new loan ($1000) hurts scores for 4-6 months. A big loan ($25,000) hurts scores for a year or more.
CREDIT CARD USAGE RATIO
is your [total balances] divided by your [total limits]. A higher ratio means lower scores. (More in Step 4)
0-30% Ratio = Doesn’t hurt scores.
30-60% = Scores drop 20-40 points.
60-100% = Scores drop 40-100 points.
VARIETY OF ACCOUNT TYPES
Showing you can handle a variety of credit obligations helps scores.
are home & real estate loans.
are credit cards, charge cards, & home equity lines-of-credit.
are auto, recreational, or student loans paid by monthly installments.
require the full balance paid every month.
ONLY HARD INQUIRIES AFFECT YOUR SCORES
These occur when you apply for credit (i.e., mortgage, auto, credit card, cell phone).
HARD INQUIRIES AFFECT SCORES FOR ONLY 6 MONTHS
even though they remain on your credit report for 2 years. They affect your scores by 4-10 points per inquiry, depending on the type of credit application.
Mortgage Inquiry: about 4-7 points.
Credit Card Inquiry: about 6-10 points.
MULTIPLE INQUIRIES WHILE SHOPPING FOR LOANS
All mortgage and auto inquiries made within any 14-day period counts as only one inquiry against your scores.
GreenBayGreg of Dellaire Realty interviews the president of Credit Matters, Dan Krueger, to discuss the basics of credit repair and credit scoring.