From my friend Kenny Johnson at North Shore Mortgage Company:
All lenders look at your FICO score when reviewing your loan application. FICO stands for Fair Isaac Corp., which calculates the rating and the score ranges from 300 to 850. According to FAIR ISAAC, the median FICO score is 723. Borrowers with a score of 700 or more generally are considered prime. (get the best terms)
Pay Down Balances: Since 30% of your FICO rating is made up of how big your balances are compared to the credit available to you- what’s called a credit utilization ratio- one of the fastest way to increase your score is to pay down your debts, says Craig Watts, public affairs manager for FAIR Isaac. There is no magic percentage however credit experts recommend you stay below 30% of balance to high limit so the lower this ratio, the better your score.
Pay On Time: Your payment history or how often you pay your bills on time (or late), is equally important, in making up another 30% of your FICO score. A late payment stays on your report for as long as seven years. Its impact on your score however gradually fades over time as long as you get current on the debts owed. Your score will improve gradually in as few as six months of on time payments. According to Evan Hendricks, author of “Credit Scores and Credit Reports” and you’ll see a more significant leap after one year.
Resist New Credit: New credit cards and store credit cards offers can be tempting, especially if you get 20% off your purchase at the check out counter. If you are about to refinance or purchase a home, don’t open any new lines of credit. The number of times you apply for new credit, called inquires, account for about 10% of your FICO score.
Fix Errors: Make sure to check for errors periodically as up to 79% of credit reports contain a mistake, some serious enough to result in a denial of credit. You may request a free copy of your credit report every 12 months by going online at www.annualcreditreport .com or call (877)322-8228. If you find a discrepancy, the credit bureaus provide instruction on the credit report, towards the end of the report, on how to contest any errors. For best results to resolve serious errors, a paper trail must be started, send your complaint in writing along with a copy of the report highlighting the error in question by certified mail. This type of mail requires a signature upon receipt and the bureau, by law, will have 45 days to investigate your claim. After this time has passed and they cannot verify the debt, they must remove it or you can then contact The Federal Trade Commission for further guidance.
To Contact Kenny Johnson at Noth Shore Mortgage, call 844-7211
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