There
are three major credit-reporting agencies – Equifax, TransUnion, and Experian -
and each provides critical information to lenders, thereby reducing fraud and
credit losses. Furthermore, each takes a different approach to calculating your
credit score. Equifax's model is called BEACON, TransUnions's is called EMPIRICA,
and Emperian's is called FICO, the best known, developed by Fair Isaac
Corporation.
Your credit file contains personal data, such as birth date, aliases, current
and previous addresses, judgments, tax liens, notices of default, bankruptcies,
and information on most of the payments you've ever made on homes, cars and/or
credit cards. However, the most important information the agencies use is the
following:
Credit history – How long have you had credit?
Payment history – Do you pay bills on time?
Credit inquiries – How many times have companies checked your credit?
Credit card balances – How many credit cards do you have and how much do you owe on each?
All information is factored in and assigned a value. An FICO is then determined
with a range from 300 to 800. The higher your credit score, the better. In
addition to getting a loan, a higher score may qualify you for a lower interest
rate.
Before applying for loans, prospective homebuyers are encouraged to check their
credit scores with the three agencies and dispute and correct inaccurate data.
Find out your own score before a lender surprises you with a low number.
Equifax's Web site is
www.equifax.com, TransUnion's is www.transunion.com, and
Experian's is
www.experian.com. Furthermore, Fair Isaac Corporation's Web site is
www.myFICO.com. A minimal fee is charged to obtain your FICO score and
credit report.
Knowledge is empowering, and the more you know about your own credit score, the
more informed you will be when you meet with a lender to obtain your loan and
the best interest rate possible for your new home.
Your Credit Score is very important. Protect it
Lenders recheck a buyer's credit the day before closing? Remind buyers that they should not apply for any new credit after they complete the mortgage application. If for some reason they do open a new credit account, they should provide details of the new account to the Mortgage Banker as soon as possible. The day before closing is too late.
Improve your credit scores
8 Tips to improve your
credit scores
1. Pay on time-not rocket science to understand this one.
2. If you can't pay on time, notify your lender and work something out with
them.
3. Get current on past due accounts.
4. Keep low balances relative to your credit limit.
5. Don't open new accounts just to lower your credit capacity as having to
much capacity is a risk also.
6. Consider keeping old accounts open, keep it all within a short time frame
such as 14 days or less.
7. When shopping for new credit, keep it all within a short time frame such
as 14 days or less.
8. Borrowers with a bad credit history can improve scores by opening a new
account and managing it responsibility.
In General it takes time and discipline to improve your credit score. Don't
let anyone tell you otherwise. The only person that can improve your credit
score is you.
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