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Your Credit

Although there are several scoring methods, the score most commonly used by lenders is known as a FICO because of its origins with Fiar Isaac and Company. Fair Isaac is an independent company that came up with the scoring method and software used by lenders, insurers and other businesses. Each of the three major credit bureaus Experian, Equifax and TransUnion worked with Fair Isaac in the early 1980's to come up with the scoring method.The three national credit bureaus each have their own version of the FICO score with their own names. Equifax has the Beacon system, TransUnion has the Empirica system, and Experian has the Experian/Fair Isaac system. Each is based on the original Fair Isaac FICO scoring method and produces simliar numerical results for any given credit report.

 

Your Credit Score

The number itself can range from 300 to 850. The formula for exactly how the score is calculated is proprietary information and owned by Fair Isaac. Here, however, is an approximate breakdown of how it is determined:

Your payment history – about 35% of a FICO score
Have you paid your credit accounts on time? Late payments, bankruptcies, and other negative items can hurt your credit score. But a solid record of on-time payments helps your score.

How much you owe – about 30% of a FICO score
FICO scores look at the amounts you owe on all your accounts, the number of accounts with balances, and how much of your available credit you are using. The more you owe compared to your credit limit, the lower your score will be.

Length of your credit history – about 15% of a FICO score
A longer credit history will increase your score. However, you can get a high score with a short credit history if the rest of your credit report shows responsible credit management.

New credit – about 10% of a FICO score
If you have recently applied for or opened new credit accounts, your credit score will weigh this fact against the rest of your credit history. FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur. If you need a loan, do your rate shopping within a focused period of time, such as 30 days, to avoid lowering your FICO score.  

Other factors – about 10% of a FICO score
Several minor factors also can influence your score. For example, having a mix of credit types on your credit report – credit cards, installment loans such as a mortgage or auto loan, and personal lines of credit – is normal for people with longer credit histories and can add slightly to their scores.

 

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Opt-Out Credit Info

Having credit checked is an important and necessary step in the home buying process, as well as something that is done on a regular basis for any number of reasons. Few people realize that each time their credit is checked, the “inquiry data” that the credit bureau has on file has now become a commodity.  This information is being sold by the credit bureaus to other lenders.Lenders that purchase these leads at a premium will then do everything they can to recoup their investment and turn a hefty profit.  Super sneaky bait and switch tactics are being used to lure clients away from their reputable lender.  Clients have even been called by disreputable lenders and told that the lender they had been speaking to previously “passed on” the information to them, because they knew that they’d be able to offer better interest rates and terms.  Ouch!The good news is that you can make it stop, right away.  And pass this information on to everyone you know – your friends, family members, neighbors and coworkers.The consumer credit reporting industry has provided a way to “opt out” and remove your name from these lists.  You can contact them at 1-888-567-8688 or online at www.optoutprescreen.com.  You must opt out at least 48 hours prior to having your credit checked to make sure it is processed in time.  You can choose a five year or lifetime option, and the lifetime option does require a signed form.  If a credit report needs to be run prior to the 48 hour waiting period – at least you are aware and informed, and can be on the lookout for suspicious phone calls or mailers from someone who has purchased your data.BONUS: Opting out will also protect you from “pre-approved credit offers” arriving via mail…one of the leading causes of identity theft in the U.S. If you have had your credit report already run, then be aware that the practice mentioned above is being done.  Should you receive a call from another lender, please know that your information was not given out by Merrimack Mortgage Company, Inc. 

 

Free Annual Credit Report

Congress established this outlet to make it easier for consumers to get their credit reports and credit scores from the three national credit reporting agencies. AnnualCreditReport.com is a centralized service for consumers to request free annual credit reports from Equifax, Experian and TransUnion.

AnnualCreditReport.com provides consumers with the secure means to request and obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies in accordance with the Fair and Accurate Credit Transactions Act (FACT Act).