A Crash Course On Credit Scores
By Brian Daniel
You sit down to look at your credit report for the first time. If
you're scores are 750 or above, congratulations! You have excellent
credit; stop worrying. If you're scores are not above 750, no
problem-a journey of a thousand steps begins with the first one.
Take solace in the fact that the national average score is around
676 according to the Gallup Organization. If you're scores are below
400, 500, or 600, there's definitely room for improvement and only
one way to go-up!
If the numbers I've mentioned don't make any sense to you or you
have no idea what they mean, don't fret-I'll explain. Credit scores
range from 300 to 850. All three of the credit bureaus-Equifax,
Experian, and Transunion-offer FICO credit scores using a complex
mathematical formula developed by Fair, Isaac and Company, but they
each give the scores a different name: At Equifax, the FICO is known
as the Beacon credit score; at TransUnion, it's called Empirica; and
at Experian, it's called the Experian/Fair, Isaac Risk Model. All
these scores are determined by several factors: the number and type
of accounts you have, your bill-paying history, late payments,
collections, outstanding debt, and the age of your accounts. The
credit scoring system for each of the bureaus awards points for
each "factor" and the total number-your credit score-is an indicator
of how likely you are to repay a loan.
Here are a few quick tips to help improve your credit scores:
. Pay your bills on time, especially your mortgage payment.
. Try to keep your outstanding debt low; don't max out your
. Generally, the longer the credit history, the better the
. Don't apply for too many credit cards or accounts at one
. Try not to have too many credit cards, having two to three
If you're credit scores are above 750 you have excellent credit and
will able to get the best interest rates and terms available. As
your credit scores drop, the interest rate you'll receive for a home
loan will rise: this is known as tiered pricing. The more of a risk
the lender takes on you, the higher your interest rate will be. In
addition, all lenders have their own break points between tiers.
What this means is that one lender may raise the interest rate if a
score drops below 700, while another lender won't give a higher rate
until the score drops below 690. In summation, you should do
everything in your power to maintain good credit scores, and be sure
to shop around and do your homework when looking for a home loan
because all lenders are not created equal, and not all lenders look
at credit scores equally. Knowing that you have good credit scores
is a start. Knowing what kinds of interest rates you can get with
your credit scores is the next step.
Brian Daniel is a loan officer/marketing coordinator for Bend
Mortgage Group Ltd., a mortgage company in Bend, Oregon. For more
information or help with a Bend, Oregon home loan, visit