There are many credit scores available, but the only one that matters is your FICO score. FICO, by the way, is an acronym for Fair Isaac and Company, the developer of the score. This is the score that virtually all lenders use. Other scores attempt to approximate the FICO score, but frequently vary by a significant margin.
One Score with Three Names
The FICO score may be referred to by three different names. This is because the three bureaus have branded it for their own marketing. Equifax calls it a BEACON score, TransUnion calls it an EMPIRICA score, and Experian calls it the EXPERIAN/Fair Isaac Risk Model. Because of this you will hear of three different scores, although they are all a product of the same formula.
Why Are Your Three Scores Different?
Your three scores are different because each bureau gathers information from a slightly different mix of creditors. If you were to look carefully at your three reports you will notice that some accounts are missing on each bureau. Timing also plays a roll. A recent change in your credit may be picked up sooner at one bureau than another.
What is Included in Your Score?
Are you working on credit repair? Be proactive. But in order to influence your score it is essential to understand how it works. Here is an overview of the contributing factors.
Pay History
Your pay history is the big ingredient. This category includes installment and revolving accounts, as well as public records and collections. The age of a derogatory item diminishes its impact on your score. The first step in the credit repair process is to examine your report for obvious errors in this category which makes up 35% of your score.
Balances
Your account balances make up the next category. The relationship between the balance and the credit limit on your revolving accounts is a major factor. Anyone involved in a credit repair effort should minimize their revolving balances as much as possible. The relationship between the current balance and the original balance on installment loans is also taken into consideration. This category makes up 30% of your score.
The Age of Accounts
New credit will have a negative impact on your score, and those accounts that you have kept alive and healthy for years have a good impact. Closing old accounts is a common credit repair error to be avoided. This category makes up 15% of your score.
New Credit & Inquiries
New credit and recent inquiries are a factor. Many candidates open new secured credit cards for the long term benefit. But generally, anyone involved in credit repair should limit new credit activity. Either way you will lose a few points on this one. Fair Isaac weighs this at 10% of your score.
Type of Credit
The type of your credit is the final 10% of the calculation. Fair Isaac won't define the perfect mix of mortgage, installment, revolving, and consumer debt, but in our experience the key to a long term successful credit repair effort is to be a moderate user of credit, make your payments on time, and try to keep those revolving balances down.
False Credit
As you begin your effort it is important to have reliable information. Amazingly, the same three credit bureaus that sell authentic FICO scores to lenders also sell unreliable estimated scores to consumers. Every day untold numbers of consumers go to TransUnion's "True Credit" website and pay for what they believe to be their credit scores. What they get are deceptively named "TrueCredit" scores which vary significantly from the FICO scores used by lenders. Here is the (almost impossible to find) small print from the TransUnion website. "TrueCredit is not connected in any way with Fair, Isaac and Company; the credit score provided here is not a so-called FICO score. The credit scores of TransUnion may not be identical in every respect to any consumer credit scores produced by any other company."
Real Credit Scores
Are you starting the process of credit repair? Do you want to see your real FICO scores? MyFico.com is the only place that consumers can purchase their authentic FICO scores. Want to save some money? It is handy to know that mortgage brokers typically look at all three FICO scores when pre-qualifying you for a mortgage. If you ask, they just might give you a copy of your report along with all three scores. It can't hurt to save a few dollars!
Copyright ? 2007 James W. Kemish. All Content. All Rights Reserved.
Owner builder construction loans have found a way to actually increase borrowers' credit scores while they build. This boost during construction is a drastic turnabout from the typical phenomenon of decreased credit ratings for individuals building a home. In a time of falling credit score averages around the nation, this shift from owner builder financing is a welcomed change.
It is no secret that the nation's average credit score has dropped significantly over the last couple of years due to the rash of foreclosures and mortgage delinquencies in the housing market. In fact, Experian, one of the three credit bureau giants, reports that the average credit score has dipped below 700, all the way down to 692.
It is also no secret that having a score above 700 is a key to obtaining the best financing rates and terms. So, for someone who wishes to build a home, the prospect of a potentially decreased credit score is discouraging. But, unfortunately, history has shown us that the typical construction loan borrower, whether hiring a general contractor or acting as an owner builder, does in fact see a decrease in their credit scores while they build.
Fortunately, recent work with owner builder construction loans has shown a refreshing shift in the way a borrower's credit score can be protected, during the construction phase. Indeed, an owner builder now has some solid options to help actually boost credit scores while building a home.
Let's start with some basic inherent features of the owner builder construction loan that are available to aid the borrower and protect the credit score. First, it is important to note that a good owner builder loan will not penalize the borrower for over-budgeting. In fact, it should be encouraged.
For example, if an owner builder pads his budget, there will be less chance of running out of money during construction and having to pay for costs out of pocket. By avoiding these out of pocket costs, you can avoid running up a high balance on your credit cards - one of the main reasons that borrowers often harm their credit scores when building a house.
So, how can an owner builder construction loan encourage over-budgeting? There are two main ways. One way is that a good loan will allow interest to accrue only on what you actually borrow. Thus, you can comfortably pad your budget knowing that you won't have to pay interest on any cost that you don't actually need. The second way to encourage over-budgeting is to allow an owner builder to take a cash payment for all leftover funds once the home is completed. By doing this, an owner builder with money leftover in the budget once the home is completed, can use those funds for paying down any other credit debts. This will, in turn, improve credit scores dramatically.
Another important, credit-protecting, inherent feature of an owner builder construction loan is something called an interest reserve, which allows you to avoid making mortgage payments out of pocket on your construction loan while you build your home. With this feature, you can more easily manage your money and continue to make your monthly payments on the home you are living in.
By using an interest reserve feature, you don't have to make two simultaneous home payments. This means there is a much smaller chance of being tight on money and being late with any mortgage payments - a huge credit score penalty.
These inherent features of an owner builder loan are providing a tremendous amount of protection to a borrower's credit score during construction. But, there have been some recent improvements that are truly revolutionizing the construction loans.
Nowadays, if you want to be an owner builder, you can actually boost your credit scores while you build by simultaneously working with a credit enhancement program. The best owner builder programs make this readily available for their clients by partnering with respected credit restoration programs.
In fact, it is sometimes possible to have the cost of the credit restoration program prorated from the financing fees of the owner builder loan. At the very least, it is usually quite simple to wrap the cost of the credit enhancement into the construction loan to minimize any out of pocket expenses.
Imagine building your own home as an owner builder and actually boosting your credit score by 100 points during construction - a time when borrowers used to see decreases to their credit. The key is ensuring that your loan program has partnered with a respectable company that provides quality, permanent credit enhancements. In other words, avoid credit restoration companies that only show short term, temporary credit boosts that will take your money but leave you with nothing to show for it in the long run.
If the owner builder construction loan program is working with a quality credit enhancement and restoration company, you will know it for a few reasons. First, the credit company will be comprised of licensed attorneys who specialize in credit repair. Second, you should see examples and case studies of individuals who have gained long term credit score improvements. And, third, the company should provide actual permanent removal of derogatory accounts from your credit report.
As an owner builder, you want to ensure that the credit restoration company will be aggressive in your favor and actually take the credit bureaus to court over your derogatory accounts. Therefore, they must be licensed attorneys. And, therefore, they can provide you with permanent credit boosts while you are proceeding through your owner builder construction loan.
Both Jim Kemish & Chris Esposito are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Jim Kemish has sinced written about articles on various topics from College Student Loan, Credit Loans and Free Credit Report Score. Jim Kemish is the president and founder of Power Mortgage, a company based in Delray Beach, Florida. Power Mortgage Corp was established in 1989 and s. Jim Kemish's top article generates over 301000 views. to your Favourites.
Chris Esposito has sinced written about articles on various topics from Real Estate, Free Credit Report Score and Real Estate. Chris Esposito provides for individuals who wish to act as their own general contractor and build their own home. For more informatio. Chris Esposito's top article generates over 40500 views. to your Favourites.