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- Credit Scoring -

What is a "Credit Score"?

When you apply for credit - whether for a car loan, mortgage, credit card, etc., information in your credit file is fed into a statistical model. That model assigns a numerical score designed to predict your risk as a borrower. The higher the score, the safer the borrower (from the creditor's point of view). Credit scores have been utilized by lenders for over 20 years, but have only become common practice in the mortgage business in the past 5 years. The most widely recognized score for the mortgage industry is the FICO, or Fair Isaac Score. There are three credit bureaus in the country of which each have their own names for the FICO score. The FICO score actually is from Experian, while Equifax uses Beacon scores and Trans Union has Empirica scores.

How does my Credit Score affect getting a mortgage?

FICO scores range from approximately 350 to 875 points. The higher the number, the lower the risk of default. A high credit score may often mean a speedy and competitively priced mortgage loan. On the contrary, a low score could mean higher interest rates, and more documentation. Many lenders do not make loans to consumers with scores under 620. (But Atlanta Mortgage Group does!)

How can I get my credit score raised?

It may take some time, but it can be done.

- Be sure to make all payments on time
- Close the accounts that youíre not using. (Credit is good - too much credit will hurt your score)
- Keep balances on revolving accounts at about one-third of the high credit limit
- If you are contemplating applying for a mortgage within 30 days do not pay off any collections, judgements, liens, etc
- Do not consolidate and pay off bills. Doing so could actually lower your score
- Keep inquiries to a minimum. Donít let anyone access your credit report unless they have good reason to. (Inquires made by the person listed on the credit report does not affect credit scores)

It is a good idea to periodically check your report to see what is being reported to your credit file. You may contact the 3 credit bureaus directly and request a copy of your report. If there is information in your credit file that is incorrect, re-contact the 3 credit bureaus, and dispute the inaccuracies. Information must be presented to all three bureaus to ensure it will be corrected properly. Your score cannot be changed by any other source than the 3 bureaus. Here are their phone numbers.

Equifax (800) 685-1111
Experian (888) 397-3742
Trans Union (800) 888-4213


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