What determines your Credit Score?

by Brian Berman on April 2, 2010

Credit Chart

Mortgage Atlatna uses three main credit agencies, Equifax, TransUnion, and Experian to determin your credit score. Each agency receives information from your creditors and uses five main factors to determine your score. Each agency awards points for each of these five components. Credit Scores may range from 300-850. The factors are listed below in order of importance.


  1. PAYMENT HISTORY – 35% IMPACT
    Every time a payment is due a creditor will report if the last payment was paid as agreed or past due. Paying debt on time and in full has the greatest positive impact on your credit score. Derogatory or late payments, judgments and charge-offs all have a negative impact. Delinquencies that have occurred in the last two years carry more weight than older items.

  2. OUTSTANDING CREDIT CARD BALANCES –
    30% IMPACT

    This factor may be the most over looked by consumers. Outstanding credit card balances marks the ratio between the total outstanding balance and available credit. Consumers should make an effort to keep balances as close to zero as possible, and definitely below 30% of the available credit limit at least 2-3 months prior to trying to purchase a home. It has been the experience of Mortgage Atlanta that the credit agencies take more points off as your balance approaches your limit.

  3. CREDIT HISTORY – 15% IMPACT
    This portion of the credit score indicates the length of time since a particular credit line was established. A seasoned borrower will always be stronger in this area. Recently opened accounts will hurt this factor of your credit. Please make sure to read The Dos and Don’ts during the Loan Process for more information.

  4. TYPE OF CREDIT – 10% IMPACT
    Mortgage Atlanta recommends having a healthy mix of auto loans, credit cards and mortgages as this is more positive than a concentration of debt from credit cards only. You should always have 1-2 open major credit card accounts. If you are using a credit card to furnish your new home, or a store line of credit, make sure you do not exceed your 30% threshold!

  5. INQUIRIES – 10% IMPACT
    This percentage of the credit score quantifies the number of inquiries made on a consumer’s credit within a twelve-month period. Each hard inquiry can cost from two to 25 points on a credit score, but the maximum number of inquiries that will reduce the score is ten. In other words, 11 or more inquiries within a six to twelve-month period will have no further impact on the borrower’s credit score. Note that if you pull a credit report yourself, it will have no effect on your score.

Remember that the credit score is a computerized calculation. Personal factors are not taken into consideration when a credit report is generated. It is merely a snapshot of today’s credit profile for any given borrower, and it can fluctuate dramatically within the course of a week.

For a Mortgage Copy of your credit report please contact us.

Click here for information on how to obtain your credit report for free. (NOTE: When you get your free report they often times do not give you your official credit score)

 

 

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Mortgage Atlanta, LLC. 601 Woodlawn Dr,, Suite 340. Marietta GA 30067. Phone: 678-564-1522 info@mortgage-atlanta.com

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