MANN MORTGAGE
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Credit Facts

Credit Scores Explained

We’ve made it easy for you to understand credit score factors and how they affect your ability to get a home loan. Click on the links below for helpful information that explains credit basics, how to look up your credit score and, if needed, suggested ways to correct or improve your score.

What is a Credit Score?

A credit score is a ranking number that is determined by evaluating information that is on your credit report. Potential lenders review your credit report and credit score, along with other factors, such as your ability and likelihood to repay debt.
Credit scores are commonly referred to as “FICO scores” because most credit scores are produced from software developed by Fair Isaac and Company (”FICO”). For more information about FICO scores, go to www.annualcreditreport.com.

What Makes Up a Credit Score?

A FICO score generally ranges from 300 to 850. FICO scores are calculated from many sources of information in your credit report, which is based on the importance of the following five categories for the general population:

  • Payment History 35%
    Were Payments Made on Time?
  • Amounts Owed on Accounts 30%
    Is the balance owed close to the limit?
  • Length of Credit History 15%
    How long have your accounts been open?
  • New Credit 10%
    How many new accounts have been opened?
  • Types of Credit Used 10%
    Mortgage, auto, consumer finance accounts, revolving and installment loans.
  • It’s important to note that higher scores indicate low credit risk.

What is Not in Your Credit Score?

  • Your race, color, national origin, sex, age, marital status
  • Your salary, occupation, title, employment information, or residence address
  • Any interest rate being charged on your credit accounts
  • Any items such as family/child support, rental agreements, credit counseling participation

What Can Affect Your Credit Score

Your FICO score is a “snapshot” of your credit history at a given point in time, and can change based on the factors that make up your credit score.

  • Late Payments - Pay your bills on time and if you have missed a payment, get current.
  • Credit History - When you payoff a debt or collection, or close an account, the credit reference still remains on your credit report for a minimum of seven years.
  • High Balances - Keep outstanding balances low on credit cards and other “revolving” accounts.
  • New Credit - If you have been managing credit for a short time, don’t open a lot of new accounts.

How To Improve Your Credit Score

Your score can improve by managing your credit responsibly over time and following some basic tips:

  • Make sure the information in your credit report is correct. You are entitled to one free credit report annually from the three credit bureaus - Experian, Transition, and Equifax. Visit www.annualcreditreport.com to obtain your free reports. You may also purchase a copy of your credit score report through this website.
  • Review your credit report for accuracy (date opened, account balance, account limit, last activity) and have incorrect or erroneous information updated.
  • Pay down high credit card and revolving account balances, but don’t close the account. Don’t apply for credit that you don’t need - excessive credit report “inquiries” can lower your score.
  • Avoid moving credit balances from one account to another just to take advantage of low introductory interest rates. The combination of “inquiries” and “new accounts” can negatively impact your score.
  • If possible, avoid “finance company” type credit accounts, including “90-day” and “12 months same-as-cash” accounts. Mortgage loans, installment loans and revolving credit card accounts impact your score more favorably than finance company accounts.

Where To Check Your Credit Score

Experian (Formerly TRW)
PO Box 949
Allen TX 75013-0949
(888) 397-3742
http://www.experian.com

Trans Union Corporation
Consumer Disclosure Center
PO Box 390
Springfield PA 19064-0390
(800) 916-8800
(800) 888-4213
(714) 680-7292 - Fax
http://www.transunion.com

Equifax
PO Box 740241
Atlanta GA 30374-0241
(800) 685-1111
http://www.equifax.com