Credit Explained

You've spoken to a realtor!!!!
You've started looking!!!
You've spoken to a mortgage lender........and your credit is not what it needs to be.
How did this happen?

What is credit?

​Credere- Latin -to believe or trust

• Who do you trust enough to lend your hard earned money? Why?
• Do you believe that you will be paid back?
• Now what about you?

• How can you prove that you can be trusted to borrow, pay back, and pay back on time?

What is a Credit Reporting Agency?
Short answer-a data warehouse.
Companies who wish to extend credit to consumers voluntarily report information to one or more of the Credit Reporting Agencies.
Equifax-Experian-TransUnion.

Lenders provide the following information to the Reporting agencies

• Identifying Information
• Credit Accounts-Dates, limits, amounts, balance and payment history
• Credit Inquiries-List of lendors who have inquired about your credit.
• Bankruptcies and Collections

Later these same companies request this information that has been collected in order to check so see if they are willing to extend credit to you and at what cost.
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Can I access this information?
You are eligible for a free copy of your credit report from each of the 3 major credit reporting agencies, Equifax, Experian,  and TransUnion annually.
To request a copy visit: www.annualcreditreport.com
Note this will not include your FICO score.

What is a credit score?
Your score is an algorithm derived number that takes into account your credit information and give lenders a snapshot of your creditworthiness.

I already know my score. I got it from 

• my credit card company
• that "free" credit website
• my bank

Yes that is a score, but it is probably not the same score that lenders use.​

What Score do the Lenders use?

• FICO Scores- FICO, formerly known as Fair Isaac Corporation, invented FICO scores and has numerous types of scores for lenders to use.
• Over 90% of U.S. lending decisions use FICO Scores.
• It is more than likely that your lender will be looking at your FICO score so looking elsewhere will most likely waste your time.

FICO Advanced -- Get 3-Bureau Credit Reports and FICO Scores

Mortgage Score-FICO Classic

• If you are looking for a mortgage you must be sure that you are looking at the FICO classic score as this is the specific score used for mortgages.

What are the FICO Ingredients?
35% Past Delinquencies
30% Debt Ratio
15% Average Age of Credit File
10% Mix of Credit
10% Inquiries