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Credit Score FAQ'sWhat is a credit score?A credit score provides a numerical snapshot of someone’s credit at a point in time. It reflects your credit risk level—the higher the number, the lower the predicted risk. Low numbers indicate greater risk. The best-known scoring system—the FICO Score—is a credit bureau risk score generated by information from your credit report only. Credit scores aren’t stored as part of a credit profile, and may change from lender to lender since calculation factors vary. The score does change every time credit information changes in your credit report and a new or minimal credit history means it may not be possible to calculate a score. Why are credit scores used?Before credit scores, lenders mostly relied on their own judgment (and often, an incomplete credit history) in making lending decisions. A lender’s judgment, opinion and personal bias often led to decisions that had little bearing on an applicant’s ability to manage financial obligations, credit and debt. Now, with computer analysis and access to a credit history and status, a credit score is available to assess risk fairly and equitably, and to make lending decisions objectively. Who uses credit scores?Mortgage companies, banks, auto dealers, credit card companies, retailers and most other lenders that offer credit or loans use credit scores to make lending decisions. And often those decisions are made in minutes, making the credit score a timesaver for lenders and consumers. Though many factors are used to determine credit risk, the credit score is the top indicator of creditworthiness. What are the different types of credit scores?The lending industry uses a wide range of credit scoring programs. MortgageEase prefers CreditXpert, a leading credit scoring company used by three of the top five U.S. banks. The FICO score — developed by Fair, Isaac & Company, Inc. — is commonly known. Many consumers are also familiar with the Equifax Beacon Score and Experian PLUS Score. But there are a variety of FICO versions, and different ones may generate a different score for the same person. CreditXpert Credit Score™ is similar to PLUS and the FICO, which will underwrite your loan application. But they do differ. Why?
How do you get your credit score?At MortgageEase, we want customers to understand the information used in assessing their credit applications. And, consumer experts recommend that consumers monitor their credit status on a routine basis. By offering you your CreditXpert score and analysis for free, we become closer partners in the lending decision since this enables you to better manage and often improve your credit profile. You also have the right to view other credit scores. Fair Isaac gives consumers access to their FICO score from all three credit bureaus for $12.95 per bureau. To order your FICO score from any of the three credit bureaus, go to http://www.myfico.com. Does your CreditXpert Credit Score™ request negatively affect your credit report?No. A consumer request for a credit report from CreditXpert Credit Score™ won’t flag as a credit inquiry on any copy of your report supplied to lenders. Your request won’t have any negative impact on your credit score or credit rating. How should you use your credit score?Use the CreditXpert analysis from MortgageEase to understand:
How are credit decisions made?Your credit score is an objective snapshot of how lenders will see your credit profile—needless to say, it has a lot of impact. Still, it’s just one factor of many that a lender may consider when assessing your loan application. Employment, income, expenses, assets, equity and recovery from past financial setbacks can also have a bearing on their credit decision. Sometimes, a lender may even prefer to lend to a borrower with a low score if other factors are weighted favorably. Lenders usually consider three areas:
How do you interpret your score?Your credit score probably ranges from the mid 300s to 850. While lenders have different and often custom lending guidelines, and scores vary from bureau to bureau, here’s a general idea of what your score tells a lender:
What behavior determines your score?Scores are analyzed and calculated using proprietary systems and models that often differ. Since credit scores measure default, scores are calculated using statistics to predict credit risk. As a result, repeated minor defaults usually indicate a higher risk than a more serious but isolated credit issue. So what generates a high score or a low one? Five elements, listed below by priority first.
What factors are usually not considered in a credit score?The Equal Credit Opportunity Act Credit prohibits credit bureaus from using specific demographics to calculate a credit score. But some lenders may use these specific factors such as occupation and income, to determine a proprietary or custom credit score. Under the Consumer Credit Protection Act, credit bureaus do NOT collect information about your:
What are some things you can do to improve your credit score?
How do you resolve issues on your credit report?Questions? Issues? Incorrect information on your credit report? Contact the three main credit bureaus that maintain credit data:
Need more information about your credit score? We’re here to help. Give us a call today at 301-528-0022.
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