Is Your Credit Score Killing Your
By Blane Russell
Credit score? You didn't know you had such a
thing, did you?
Many people don't, but your awareness of this all-important
credit evaluation tool can literally make or break your chances
of securing a loan.
In its most basic form, your credit score represents your
creditworthiness in the form of a number. Lenders use this
evaluation when determining the risk in lending you money,
whether or not to grant you credit, how much credit they should
grant, and what interest rate to charge.
A variety of factors are considered during the calculation of
your credit score such as:
* how much money you earn.
* how long you have been using credit.
* whether you have made payments on time.
* your level of education.
* the number of years you have lived in a single location.
* the number of years you have worked for the same employer.
* whether or not you are a homeowner.
What the credit companies are looking for with many of these
factors is your stability and your likelihood to repay the loan.
For example: if you have been using credit for many years, make
90% of your payments on time, have a college education, have
lived in the same location for 5 years, and have worked with the
same organization for 4 years; you are more likely to obtain a
higher score. (The higher, the better.)
On the other hand, if you have consistently made late payments,
have a high school education, move frequently, and change jobs
every year; your score will undoubtedly be much lower. Lower
scores jeopardize your chances for getting credit.
Where Does Your Score Come From?
How, exactly, is your score determined? There are a number of
ways; and each lending institution does not use the same
criteria. The following is a typical method:
Payment History = 35% - Notice this element carries the most
weight. It looks at missing or late payments, frequency of late
payments, collections, credit card payments, loan payments, etc.
Outstanding Debt = 30% - The amount of outstanding debt on loans
and credit cards will decrease your credit score. Lenders will
look for how many outstanding balances you have, how long you
have had these balances, if you keep a high or "maxed out"
balance on your credit cards, and how many open revolving credit
cards you have.
Length of credit history = 15% - How long have you been
successfully paying your debts? (The longer, the better.) A long
credit history that shows on-time payments will be a benefit to
Recent inquiries = 10% - Each time you apply for credit (of any
kind), a credit inquiry is made in your history. Many inquiries
(especially if you have many inquiries without any approvals)
will raise a red flag and decrease your credit score.
Type of credit = 10% - What types of credit do you use? Credit
cards, equity loans, signature loans? Your score will reflect
how many types of loans you have, and for how much.
How Can You Increase Your Score?
Certain factors can play havoc with your credit score. As
mentioned earlier, with each inquiry you will lower your credit
score; thus, preventing you from obtaining the loan you need. To
help alleviate this, use a mortgage broker when applying for a
loan or mortgage to reduce the
number of inquiries on your credit file.
Maintain your employment and residence status for at least TWO
years. This shows stability and helps to build trust in the eyes
of your lender.
Do not keep credit card balances near, at, or over your credit
limit. If you have high balances now and are considering
applying for a loan, begin to pay them down immediately.
While certain factors in your history cannot be erased, you can
begin to do everything in your power to improve your financial
snapshot. When you do, a better credit score will be ready when
you apply for loans in the future.
Blane Russell is President of Russell and Associates, a
full-service mortgage broker specializing in debt consolidation,
second mortgages, refinances, and no income verification loans.
To get the credit you need NOW, visit http://www.refinanceu.com
today for same day approvals on most loans.