Credit
scoring uses data from any leading credit repository
- Equifax, Trans
Union, or Experian to measure the borrower's default risk. Scoring involves
measuring hundreds of variables. A credit score, known
as the FICO score, is generated using a computer program
designed to analyze credit data and measure a borrower's
default risk.
According
to Fair,
Isaac and Co. Inc. the FICO score reviews
the following items in computing a score:
-
Payment patterns on various accounts, such as
credit
cards, retail accounts, installment loans, mortgage
loans.
-
Number of existing credit cards.
-
Open or active accounts, their type, the length
of time
credit has been available, and credit levels.
-
Current indebtedness level and its relation to
available
credit.
-
Credit
performance, including the number and severity
of late payments.
-
Number
of recent inquires or attempts to get new credit.
Tips
for Cleaner Credit
Do
the following before your start looking at homes.
-
Don't
let stores run credit checks for new accounts.
(Lenders who see several recent credit checks
are often
concerned that borrowers may take on additional
debt soon after the mortgage is signed.)
-
Don't
open new credit cards or increase credit limits.
-
Do
pay all credit card bills on time.
-
Do review your credit report for errors.
-
Do
close unused credit card accounts, but maintain
one
of your oldest cards to illustrate a lengthy credit
history.
-
Don't co-sign any loans.
Adapted
from "Help Borrowers Understand Credit Scoring,"
Jerry DeMuth, REALTOR® Magazine
Accredited
Buyer's Agent  Home
Ownership Assistance
Credit
Reports Mortgage
Calculators
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