Your Credit Report
Today, most loan decisions use credit scoring models to determine eligibility for credit, interest rate, terms, down payment amounts and other terms of a loan. These decisions are almost always generated by “automated underwriting systems”, giving lenders the capability to generate millions of loan decisions each year.
Several years ago a company called Fair, Isaac & Company (FICO) developed a system of credit scoring. Each of the three major credit bureaus—Trans Union, Experian, and Equifax—now use their own version of the FICO credit scoring model. Hence, we have the use of the terms FICO and credit scores. Credit scores have a big financial impact on your life and your ability to make purchase on credit, whether it be a home mortgage, an automobile, or other financed purchase.
When considering a home purchase it’s an excellent idea to get a pre-approval in place with a lender who will review your credit with you. If there are issues it’s best to get them cleared up in advance. Here are some typical questions we run into when dealing with our clients.
- How is a credit score computed?
- How can I improve my credit score?
- Will a low credit score prohibit me from purchasing a home?
- I pay my bills on time every month, why is my score low?
- How can I correct errors on my credit report and how long will it take?
- I have information on my credit report that is not mine, what do I do?
- Can I get a copy of my credit report?
- I do not have any credit or credit score, what can I do?
- How long does a collection account, judgment, or bankruptcy stay on my report?
- I’ve heard that several inquiries on my report can lower my score, is that correct?
- What information does credit scoring use to compute my score?
- What information does a credit score ignore?
- How does my debt-to-income ratio affect my score?
