How Scores Work (Credit Score Basics 2)

We are doing a series of posts on how your mortgage credit score works… meaning, how do they come up with the number? We covered the fact that there are different “Models.”  This means that not only do the three repositories (the “data banks” of information which is really what the 3 credit bureaus are) have different ways of coming up with numbers… they come up with different numbers for your Medical Credit Score, a Mortgage Credit Score, an Insurance Credit Score, a Retail Credit Score – and the one they use if you are looking for a job!  (there might be others these are the ones I am familiar with).

As of  October 2012 Credco analysis shows the average mortgage credit score in America is now 690. WOW!  The other interesting thing to me was how many people did not have enough credit to have a score!

With a mortgage credit report, we get a Score Factor with each report. The “factors” tell us what is the most important item we can do to raise your score.  These factors are based upon how you look when compared to other people with similar credit.  So if you are in Bankruptcy you are scored with people who are also scored against them – not someone who just started into the Credit “System.”  The primary “buckets” or pools of people you could be grouped in are:

• People who are trying to Acquire (get) new credit
• People who have the same Types of credit in use (are you a big credit card user?  Do you have 3 cars payments? that sort of thing)
• People who have a similar Payment History as you do
• People who have about the Amount of Debt as you have versus the High Credit Limit you COULD borrow
• People who have  about the same Length of Credit History…

The thing that takes the most impact on your mortgage credit score is Payment History – and then it’s weighted based upon what you’ve missed a payment on. Collections, Judgments and any other public records really do pound your score.  And finally the length of time since you were late.

Time and distance since the derogatory reporting is really going to be what helps you.  Paying a Collection off might be needed to get a mortgage loan – but that doesn’t mean it will help your score. Click here for more info about paying collections off (or not).

Don’t let Bad Credit stop you from buying a home!  We can help you raise your credit score! Call Steve and Eleanor Thorne 919-649-5508 – There are several First Time Home Buyer Programs that allow NC Homebuyers to get a home with 2 scores over 600!