DOS AND DONTS
There are several factors to consider when shopping for a new home. The following information provides a guide to help you make an informed decision and avoid common pitfalls along the way.
Your credit score is one of the most important numbers you have. Not only does your score affect your interest rate when applying for a loan, it can also impact your insurance rate, certain job prospects and even your chances of renting a great apartment. As a result, improving one’s credit has become a multi-million dollar industry.
Credit scores were developed by Fair Isaac and company (FICO). The models created using FICO take all the detailed information about your credit report and produce your credit score using different weights and factors contained in the FICO scoring models.
The purpose of a FICO score is to show how likely you are to become at least 90 days late in making payments in the next 24 months based on patterns in your credit history, compared with patterns of millions of past customers. Other credit agencies, such as Experian, Equifax and TransUnion, calculate their own credit scores within their own ranges; however, the FICO score is the standard that lenders use when they pull your credit.
- FICO scores are used not only for a mortgage loan and credit cards, but for auto loans, insurance and utilities.
- Credit reports reflect charge offs or collection accounts for up to 7 years, and bankruptcies for up to 10 years.
- You can order a free credit report annually, at no charge, without impacting your credit score.
- Having a minor balance without missing a payment is better than closing an account.
- Paying off an old collection may result in a drop in your credit score.
- Consolidating credit cards increases your ratio of debt to available credit and lowers your score.
- Using the maximum amount on a credit line can drop your score.