Basic Questions About Credit Scores
What is a credit score? A credit score is a number that represents a person’s relative creditworthiness. Typically a three-digit number from 300 – 850. It is the product of a mathematical model that evaluates an individual’s credit report information and, based on the analysis of millions of credit transactions used to build the model, produces the score. A higher credit score correlates to a higher probability of the consumer’s ability to repay their loans on time. How are credit scores used? Some landlords use credit scores when talking to prospective tenants. Insurance companies use them in underwrit- ing insurance applicants. Banks, insurers and investors use them to determine whether, and at what price, they are Yes. Three companies serve as the main repositories of the borrower credit data, and there are several credit score vendors that use that data. On top of that, there are many companies who sell reports containing credit data and scores, sourced from those repositories and score vendors. Each credit score vendor has a different approach, and some have several different models designed for a particular purpose, such as auto lending or mortgage lending. Additionally a mortgage credit report will provide three credit scores, one from each repository, while an auto credit report will have a single score from only one repository. Why is the score I pulled on line different from my lenders score? willing to make loans or provide insurance. Is there more than one credit score? Many reasons this can happen. First, creditors may submit their payment data to the repositories at different times. Thus a report pulled one day may be different the next if one of your creditors submitted information. Secondly, there are multiple credit score providers, each with different scoring models. Depending on the credit score provider and the models they are using the score you pull may be some different from what your bank pulls. Finally, not all creditors report to all credit repositories, some do not report to any of the repositories. If your information is not reported to all three and a mortgage report the three scores will more than likely be different. What can I do to improve my credit score? Many things will affect your score. If you apply with multiple lenders for one or more loans in a short time period that will bring your score down. Only time will help this. Late payments on loans are a big factor, pay your bills on time. Collections, repossessions, foreclosures and other major negative credit will obviously bring your score down. Surprisingly, having a new loan will lower your credit score for a few months. There are obviously many factors in the scoring process. Each person and their credit is different. Talk to your lender about your credit score. If needed, they should be able to help you with a plan that will help you get on track with a credit score that will allow you to buy a new home or car with confidence. www.fsbshannon-polo.com Member FDIC & Equal Housing Lender
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