Credit Information

Credit is the biggest factor in the interest rate you receive and what type of loan you get approved for. There are three official credit reporting agencies that provide credit scores to lenders. They are Equifax, Transunion and Experian. The middle score of the three scores is what is used to rank your credit. Credit scores are viewed by lenders in various ways but as a general rule there are "credit tiers". If you have the ability you should always strive to get to a higher tier before obtaining a mortgage.

Credit Tiers are roughly:

Score Rating Comments
740 +
A++
Will get the best rate.
720 - 740
A+
Will get the best rate with a slight adjustment.
680 - 720
A
More restrictive on non-traditional loans, cannot always get the best rate depending on type of loan, lender or other factors such as downpayment.
640 - 680
A-/B+
More restrictive on income and asset requirements, may have a higher rate than the prevailing market unless other factors are strong.
620 - 640
B
More restrictive on available loan programs and probably going to have a higher rate than the prevailing market unless other factors are strong.
580 - 620
B-
Rates will be higher as a result of credit score.
520 - 580
C
Try to get to the next credit tier if possible, call us for strategies.
Below 520
C-/D
May have some trouble obtaining a loan.

 

How to fix your credit

Many people are in the dark about their credit, whether its their score or what factors affect their scores. It’s getting easier and easier to obtain the information you need to effectively manage and improve your score.

If you are considering purchasing or refinancing a home then obtaining a credit report on yourself and anyone else who is to be on the loan is an excellent idea. When you sign up online you don't log an inquiry and you can often obtain your report for free for 30 days on a "trial membership" basis.

Factors that impact your credit score in order of significance:

1. Late Payments, Collections, Bankruptcies, Foreclosures, Past Dues
2. Outstanding balances on accounts vs. credit limits
3. Length of Credit History
4. Types of Credit
5. Inquiries

Tips to help your score:

  • Don’t close old accounts that help to establish your length of credit history. This is a common mistake.
  • Keep your balances to 30% (or less) of your credit limit.
  • Avoid opening new credit accounts that you don't need or “credit surfing”.
  • Pay all of your bills on time. Any unpaid bill, no matter what it is, can show up on your credit report as a collection.
  • Dispute and attempt to remove any derogatory entries on your credit report and document your efforts.

Call us for a free credit consultation

 

Call us: 805-496-5415

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