Credit reports and FICO scores. How they effect the Home Loan process


Interesting conversations concerning credit reports and FICO scores.  Here are some points to consider as you maintain your credit history.  NOTE:  Verify for yourself all information in this email.
Who compiles credit reports (FICO scores)?
There are three major credit history information companies – Equifax, Experian, and TransUnion.  They report their findings as FICO (Fair Isaac Corporation) scores with a low of 300 and a high of 850.
Who uses these scores and why?
Mortgage lenders, auto and personal loan lenders, credit card companies use these scores to get an idea of credit worthiness.  For example – mortgage lenders will pull reports from all three bureaus looking for a middle score of a minimum score of 640 but desiring a middle score of 720 or better.  The better the score; the less it cost to borrow money.
HOWEVER, credit providers and lenders are not the only users of these scores.  Did you know that employers and insurance companies are also pulling credit histories when considering applicants?  For example, The State of North Carolina – Commissioner of Banks office examines this information when vetting a candidate for Mortgage Loan Originator License.
What influences these scores?
10% – recent inquireries
10% – types of credit (revolving, installment, mortgage and etc.)
15% – age of credit history
30% – balances on open credit accounts
35% – payment history
With an open line of revolving credit (credit card), which of the following is more apt to reflect a higher score: A) pay off each month to a zero balance     B) maintaining a 95% balance each month     C) maintaining a 30% balance each month?
Remember it is the credit companies that came up with this system.  Therefore, they want to see the credit line being used and not abused.  C) maintaining a 30% balance each month would probably result in a higher score.  Paying the card off each month does not necessarily reflect the use of credit.  Keeping the credit line maxed out hints of abuse.  In all of these, paying on time each and every month will help move the score up. Dave Ramsey’s option is DON’T HAVE A REVOLVING CREDIT CARD ACCOUNT – therefore always having a zero balance.
What can be done to protect oneself from credit ID theft?
Google this question and you will get a plethora of answers with companies wanting to assist you for a monthly fee.  However, there are steps you can take to protect yourself for little or no money.  All three of the credit beaus offer the ability to “Freeze” one’s credit.  This method will halt the flow of information about your credit and effectively stop any additional lines of credit from being set up.  Remember though,  you have to “unfreeze” your information when you are ready for a creditor or employer to view your scores.
Here is the contact information:
www.experian.com 1-866-997-0418
www.equifax.com 1-800-685-1111
www.transunion.com 1-888-909-8872
Please forward to email to family, friends and co-workers.
Josh Cohen
NMLS # 187725
Cavalier Mortgage Group Inc.
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About Raleigh Homes Info

Greetings, My name is Tom Bohlmann. I am Allen Tate Realtor / Broker in the Raleigh, Durham, Wake Forest, Cary North Carolina areas. Your Home Search starts here: http://www.allentate.com/tombohlmann I have been involved in the Raleigh area real estate investing since 1995. I know all the ins and outs of many many different area markets that the average or even above average Realtor does not know. Give me a call or email so we can talk about your Real Estate Needs. Tom 919-543-5714
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