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Credit Scores

Answers To Common Credit Score Questions

As a mortgage professional for several years, many of my clients weren't as familiar with their credit score as they should have been. The saddest part however was how little they knew about credit scores, how it was generated and how their credit activities affected it.

From this experience, three of the most common questions borrowers had concerning their credit scores were as follows:

-> I make all of my payments on time, so why isn't my score higher?

This is perhaps one of the most common misunderstandings concerning credit scores. While on-time payments are a very important factor, this only represents about 35% of a borrowers score. Having too many new credit accounts or having every account maxed out adversely affects your score, even if you make your payments in a timely manner.

Scores drops approximately one point for every one percent of available credit you use. Keeping your credit balances as close to zero as possible have available to use increases credit scoring.

-> Why does my score go down when I apply for a loan?

Applying for a loan, whether it's to buy a cell phone or purchase a home, negatively affects a borrower's credit score for a brief period. This is because these actions indicate an active attempt to borrow money. If you're considering any major purchase, you should limit the number of inquiries by any third party for 3-6 months prior to making application.

-> Why is my score different with each credit bureau?

Many people aren't aware that there are three credit bureaus, but even more surprising is the fact that each one has a different score. This is usually due to one bureau having more or less information than the others. When this happens, you'll need to do some legwork to correct this.

Banks and other lenders use credit scores to grant credit. Getting familiar with what can affect your score will save you time and money.
 

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