What is a credit score and how does it affect interest rates?
What is a Credit Score?
- A 3-digit number used by lenders to evaluate the risk associated with lending money.
- Generated by a mathematical model created by Fair Isaac Corporation in the 1960s.
- There are 3 major credit bureaus: Equifax, Experian® and TransUnion® – 3 Scores.
- Scores range from 350-850
Score Talk
- Above 720 = Excellent
- 680 = Good
- 620 = Fair
- Below 620 = Poor
BORROWERS NEED TO WORK ON OPTIMIZING THEIR CREDIT TODAY!
Step 1 – Check Credit Report & Scores: Consumer’s need to understand their current credit situation by ordering a copy of their credit report. Congress recently amended the Fair Credit Reporting Act (www.ftc.gov/os/statutes/frca.htm) so that consumers may now receive one free credit report annually. There are three major credit bureaus: Equifax, Experian, and Transunion. Since entries can vary across bureaus, you’ll want to request a free report from each of the three companies. (Go to www.annualcreditreport.com or call 1-877-322-8228)
Step 2 – Verify the Data Being Reported: It is the consumer’s responsibility to verify the accuracy of the data being reported.
Step 3- Dispute Any Inaccurate Information: Consumer’s need to contact their creditors and send letters of dispute to the credit bureaus to have errors on their report corrected. These must be sent via CERTIFIED mail.
Conventional mortgages are risk based priced, so the higher the credit score, the better the rate. A credit score of 720 should get a lender’s best rate: below 680, your going to pay considerably more in fee and or rate.
For the Federal Trade Commission’s information on consumer credit, go to: www.ftc.gov/bcp/conline/edcams/credit/index.html
The views and opinions expressed above are those of Jim Hungerford personally, and are not associated with any organization or business directly.
