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The
5 Main Categories of Credit
1.
Late Payments,
Delinquencies, Bankruptcy,
Tax Liens, Foreclosure
2. Outstanding Debt -
Ratio of Amount Due vs.
Available Credit
3. History of Open
Accounts - How Long Accounts
are Open
4. New Applications
For Credit (Inquiries)
5. Types of Credit in
Use - Credit Card,
Installment, Mortgage, etc.
Credit
scores have a direct effect
on whether you will qualify
for a loan, and what your
interest rate will be. The
higher your scores are, the
better your rate. Your
credit scores and the
combined loan to value are
the most important factors
in determining the mortgage
rates available to you.
Credit
scores are calculated by
computer risk models that
track borrower payment
patterns. The scores are
provided by three national
credit bureaus: Transunion,
Equifax,
and Experian.
No
one factor determines your
scores, they are based on a
person's whole credit
picture. Your credit score
is a composite of both
positive and negative
information such as missed
loan payments, as well as
loan accounts paid on time.
Here
are three factors that can
be the most important:
Payment
Performance: The fewer
late payments, the better
the scores. Payments that
were 60 or 90 days late have
more of a negative effect
than a 30 day late. The age
of late payments can effect
your credit scores, more
recent late payments are
considered worse.
Credit
Use: A large number of
accounts can reduce your
credit scores, especially if
the balances are high. Using
75% of your credit limit is
a greater risk than using
25%.
Payment History: A
longer payment history is
better for accounts on your
credit report. Having
recently opened a new loan
or credit card could reduce
your scores, as well as new
inquiries. |
