How to increase Credit Scores Fast! Maintaining and increasing your credit score fast is the lesson today! Whether it be for a car, credit card application, or any large purchase, please don’t feel that the things I will cover today are limited to home mortgages.
What is a credit score? Where does it come from? What does it do?
You’ve probably asked some of these questions once, and that’s alright! In this lesson we define credit score as “a number assigned to a person that indicates to lenders their capacity to repay a loan.” In other words, you’ve essentially been assigned a value, or score, based on how well or poorly your track record of paying people or companies back is.
Credit has been around for a long time. Credit back in the 1800’s is nowhere near the same as it is today. Credit is constantly evolving. By no means is it a rapid changing series of algorithms, like ones seen on social media platforms, but it is arguably just as complex.
One of the biggest misinterpretations out there is the ability to predict FICO Scores with relative ease. All those various pie charts you might see on the internet aren’t exactly 100% accurate.
Aall the known algorithms that exist today have different purposes and uses when calculating your score. For example, “FICO AUTO SCORE 8” and “FICO AUTO SCORE 2” are used by Experian when calculating credit for auto lending. However, for mortgage lending they use “FICO SCORE 2.” Surprisingly, the three credit bureaus actually use different FICO scoring algorithms to calculate credit, which is not known to many.
For mortgage lenders, we typically rank credit scores in 7-8 categories, or tiers. From Tier 1 consisting of scores falling in the range higher than 760, to the lowest tier, which is below 640, all have a specific value to loan officers and lenders. This will obviously vary from loan to loan, but credit can play a large part in us determining loan limit, interest rate, mortgage insurance fees, and much more!
How do you maintain your credit score? Other than making on-time payments here’s a couple of tips that I’ve learned in both personal experience, and dealing with my clients. Always check for errors in your credit statements. Although unintentional, it happens way too frequently when a credit company might overcharge or undercharge someone for their monthly expense. Another thing to keep your eye out on is make sure to keep revolving around the use of less than 30% of your maximum credit amount.
The 2 most important things I’ve witnessed that people need to focus on are credit card balances and collections. As long as you’ve had a history of holding on to these, you really shouldn’t worry too much on your credit score. On the other hand, especially for home mortgages, are seeing people opening new credit lines or opening new trades. Do not do this! Not only will this look bad to our algorithm, but we will also need to run it through our creditors again, which can ultimately prolong the process of obtaining your new home! Additionally, do not spend too much of your credit balance or start making large purchases, like buying furniture until you’ve closed your deal! We’ve seen way too many people get caught up in that fantasy, and start making these large purchases that raise red flags in our system.
If you have any questions on home mortgages, credit scoring, or just seeking advice on finance, feel free to contact me at www.loanwithjen.com Equal Housing Lender NMLS # 514497
CHAPTERS:
0:00 Intro
3:01 History of Credit Scores
10:16 Mortgage Credit Tier List
11:41 specific Loans
19:00 Credit Maintenance Tips
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