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Credit Ratings
Credit Scoring
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2 of 3 Credit
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What is my credit score?
How is it determined?
All loan applications take into account your
credit score found in your credit report.
This score reflects information about how you have handled
debt and credit in the past as well as current account information.
It is not determined by race, religion, gender, marital
status, criminal record, age, or where you live.
It is determined by summarizing a number of factors
including:
Payment History
How you have paid your bills in the past gives
the lender an indication of how you may be expected to pay them in
the future. Late
payments as well as timely payments play a large role in determining
your credit score. A "willingness to pay" is important, thus late
payments in the same time period is better than random late payments
since the former usually signals an effort to pay even after falling
behind. Other considerations are the length of time bills were
delinquent and how recent the last late payments were made.
Outstanding Debt
Lenders want to know how much credit you have
and how much you have used. They
take into account how many consumer loans are outstanding as well as
current balances. In
other words, the number of open credit accounts and how much of your
available credit is used are key factors lenders look at.
Credit History
Generally, the longer you have had credit and
have managed debt successfully the better your chances of qualifying
for a loan. If you have
only recently opened a credit account or have only a few credit
references, our mortgage representative can work with you to
establish a “non-traditional” credit history based on payment of
other types of debt such as:
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rental references from landlord/property
manager
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telephone, gas and electric bills
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monthly or quarterly insurance premium
payments
Such alternative forms of credit should have at
least a 12-month history. Documentation
can include cancelled checks or bills marked “paid”.
Credit Inquiries
An inquiry is a listing of the name of a credit
grantor, or authorized user who has accessed your credit file and is
recorded every time you apply for credit such as a car loan or
opening a new charge account. This,
however, does not include marketing inquiries such as when you
receive an offer in the mail from a bank promising
“pre-approval” for a credit card.
Nor does it include auto or mortgage loan inquiries occurring
in the 30-day period prior to the score being calculated.
Auto or mortgage inquiries made within a 14-day period are
considered one inquiry, since it is assumed the buyer is simply
shopping for the best deal.
The borrower need not
fear rejection by a cold, calculating computer. While credit scores are used as an objective and consistent
measure of credit risk, they are simply tools that help the lender
evaluate your credit history and financial situation.
In the end, the final decision to approve or deny your
mortgage loan application lies with the lender, not a computer.
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