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Joseph May

Sales Manager, Loan Originator

NMLS #58817
Mar 21 2014
Loan Originator Profile Photo
1 posts

Credit Scores: The Mystery and Myths

If you are planning on buying a home, it is important to understand that today more than ever your credit scores have a large impact on both your ability to secure a mortgage and the cost of your loan. In today’s mortgage industry, 740 credit scores or higher are widely considered the top tier. Virtually every 20 point drop from 740 can affect your loan approval and the loan price.

How credit scores are computed is both complex and confusing. If your scores are not in the top tier, there are always some steps you can take to improve your scores fairly quickly. According to National Credit Care, a full service credit correction and improvement company, your FICO credit scores are weighted based on five different factors.

1)  35%  Payment History:  The record of your on-time payments

2)  30%  Available Credit:  Your credit limit minus the amount you owe on each of your accounts

3)  15%  Length of History:  The length of time since each account was opened

4)  10%  Type of Credit:  Mortgages, installment loans, revolving accounts etc…

5)  10%  Number of Inquiries:  Records of inquiries logged when you apply for credit

One quick way to increase your score could be as easy as either paying down some of your credit card balances, or having the credit limit increased on your cards. When the balance on your credit cards is above 30% of the credit limit, your credit scores will be effected negatively.

If you have a late payment on your credit report, make sure that it is not a mistake. As a consumer, you have the right to request documentation showing that the late payment being reported is accurate. If the credit agency can’t get documentation, they may be forced to remove the late payment and your scores will improve.

The Consumer Credit Protection Act and The Fair Credit Reporting Act are just a couple of laws that protect your rights with regard to lending and credit reporting.

Did you know Federal Law allows you to get a copy of your credit report ONCE a year? is the website set up by the credit agencies for this purpose.

Lastly, based on a report from the National Credit Care, here are some myths regarding credit:

1)  Paying off collection accounts will immediately increase your score.  This is not true. 

2)  Once you pay a tax lien, it no longer affects your credit score.  This is not true.

3)  Using your credit cards often will increase your payment history and raise your score.  This is not true.

Lastly, always pay on time and don’t close too many accounts.


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