We asked some of our most trusted mortgage loan professionals to give us the answers to some popular questions they receive about credit. Take a look at some of this great information they sent our way and see if there’s anything that surprises you too!
What is a Credit Report?
Your credit report is a record of your credit activity and credit history. It includes the names of companies that have extended you credit and/or loans, as well as the credit limits and loan amounts. Your payment history is also part of this record. If you have delinquent accounts, bankruptcies, foreclosures or lawsuits, these can also be found in your credit report.
How to Get Free Copies Credit Reports Per Year?
As a consumer, you may request a free copy of your credit report from each of the three national credit bureaus every twelve months. Accessing and reviewing your credit reports from each of the three bureaus annually helps you ensure the accuracy of the information. It also allows you to monitor your account history to protect against identity theft. See more info here: https://www.transunion.com/annual-credit-report
What is a Credit Score?
A credit score is a three digit number calculated from your data-rich credit report and is one factor used by lenders to determine your creditworthiness for a mortgage, loan or credit card. Your score can affect whether or not you are approved as well as what interest rate you are charged. There are many different credit scores and the credit score you view may not be the score used by a particular lender.
Will Checking My Credit Report Hurt My Credit Scores? Checking your own credit report won’t hurt your scores. Credit inquiries are defined as either hard or soft inquiries. Reviewing your own credit report is considered a soft inquiry, and soft inquiries don’t hurt your scores. Checking your credit report at least once a year allows you to identify any mistakes and helps you manage your personal finances.
How is My Credit Score Calculated?
Understanding the components that make up credit scores can help you wisely manage your credit decisions. To see how it all breaks down, here’s an example of how scores are calculated with a popular algorithm. Your payment history makes up 35% of your score, while the amount you owe lenders represents 30%. The length of your credit history contributes 15%, and the types of credit accounts you maintain comprise 10%. Finally, new credit accounts are responsible for 10%. All of these values are then broken down into a credit score, which ranges between 300 and 850 the higher the number the better.
What Affects My Credit Score the Most?
Your payment history is the most important aspect of your credit score, because it shows how you’ve managed your finances, including any late payments. Your credit history is also very important, as it demonstrates how long you’ve been managing your accounts, when your last payments were made, and any recent charges.
How Long Does Negative Information Stay on My Credit Report?
Typically, the negative information on your credit report tends to fall off after 7 years, or 10 if you’ve been through bankruptcy. Positive information remains on your report for an average of 10 years from the day its corresponding account is closed. This information applies to loans like mortgages and car loans, the types of agreements that have fixed terms on the number of years for repayment. For revolving accounts, such as credit cards, your positive history will stay on your report for as long as the account is active.
How to Dispute My Credit Report Online.
Because inaccurate, derogatory information can lower your credit score and may indicate fraudulent activity, it’s best to dispute any potential inaccuracies as soon as you spot them. The fastest and easiest way to resolve an inaccuracy on your credit report is through the online Credit Report Dispute process at https://dispute.transunion.com.
Source: Julie Vega, Mortgage Loan Originator, NMLS #595805
What is considered a superior credit score?
A score over 740 is considered superior.
If I have a chapter 7 bankruptcy, can I buy a home?
Yes, after waiting 2-4 years after the discharge, depending on the loan product. Late payments on a mortgage will strongly affect your score. It doesn’t matter if it’s an owner occupied, investment, or 2nd home.
What is the ideal number of credit cards to have in your name?
The rule of thumb is 2-4 cards not close to the limits.
How to build credit if you don’t have any credit history?
Get a secured credit card that reports to all three bureaus.
Doesn’t getting married affect my score?
No, you always will have individual credit.
If I have my credit pulled 10 times in a short period to buy something, will it affect my credit?
Yes, a number of credit pulls will affect the score.
Should I close accounts?
No, it will take leverage away. Keep accounts open.
How much should I use of my credit limit?
The rule of thumb is 30-40% of your credit limit.
How many scores are used when you look at credit?
Three scores: Transunion, Experian, Equifax. Middle score is used.
I pulled my credit through a free service; can I use that report to buy a home?
No. The free credit is to give you an idea of what your credit looks like. It’s not giving you scores of all three bureaus and was not pulled by the institution issuing the loan.
Source: Mike Lokie, Vice President, Signature Mortgage, NMLS#248396, 330-305-1996 Ext. 318, 330-280-3387 (Cell) firstname.lastname@example.org https://mike.smcinc500.com/”>https://mike.smcinc500.com/