• Payment History: 35% impact. Paying debt on time and in full has a positive impact. Late payments, judgments and charge-offs have a negative impact. Missing a larger payment has a more severe impact than missing a smaller payment. Delinquencies that have occurred in the last two years carry more weight than older items.
• Outstanding Credit Balances: 35% impact. The ratio between outstanding balance and available credit is what's important here. Ideally balances should stay below 10 % of credit limits and rarely higher than 50%. Credit scores are lowered substantially when balances exceed credit limits.
• Credit History: 15% impact. The key measure for this factor is the length of time since a particular credit line was established. The longer you've had the credit, the more positive this factor impacts your scores. A seasoned borrower is stronger here.
• Type of Credit: 10% impact. A mix of auto loans, credit cards and mortgages has a more positive effect than credit cards only. Debts with finance companies and other "high risk" lenders will have a negative effect.
• Inquiries: 10% impact. This factor is determined by the number of inquiries that have been made for credit by the borrower in the last 6 months. Each hard inquiry can cost from 2 to 50 points on a credit score, but the maximum number of inquiries that will reduce the score is 10. Additional inquiries above 10 will have no further impact on the final score.  

It's important to remember that the computers do not take any personal factors, including income, into consideration when calculating your scores. When your credit report is generated it is simply that day's snapshot of your activities. Once you begin the loan process DO NOT apply for any new credit or increase any debts without consulting your lending professional. Sometimes folks about to buy a new home get excited and buy new cars, new furniture, and the like before their home loan is finalized. This too often changes their credit picture and may alter or eliminate their approval.

We compile a tri-merge credit report which combines the scores provided by all three credit bureaus. Underwriters use the middle score of the three to determine credit worthiness, often to the borrower's advantage.

Do you know your scores? You need to know what your credit scores are and what's in your report before you begin shopping. Some erroneous items may take 2-3 months to get removed.

Learn more by scheduling a consultation.