A credit score is a statistical analysis of a person’s borrowing and subsequent payment history. The purpose of a credit score is to predict the likelihood a consumer will make a late payment on a current or potential line of credit. Scores range from 300 to 850. Scores will vary somewhat based on which of the 3 major credit bureaus is pulling the score. Financial companies use this score in the process of determining the evaluation of risk in an application for an applicant. All mortgage banks will use the “middle” score as determined by the three credit bureaus; TransUnion, Equifax, and Experian.
The credit score is a generated based off several factors including your payment history, number of credit lines available to you and the relationship between the balances and limits of your credit lines. Late payments and collection accounts will have the most detrimental impact on your credit score and will be the most difficult negative items to remove from your credit report.
The fastest way to increase your credit score (72 hours) is to pay-down the balances of your revolving credit accounts (credit cards) to 30% of their limits. Your Loan officer can confirm the actual impact of these balance reductions to your credit score and facilitate the process to you at no cost.
If you are a person with limited credit accounts with low balances and you need to increase your credit score quickly, you could potentially have some challenges. In many cases the process of settling or paying off a collections account can have negative impact on your credit score as the account will be updated to reflect the number of payments that have been late before the payoff. There are companies that specialize in the removal of negative credit information. The process can take several months and many of them charge monthly or upfront fees. Do your research and seek out information on any credit repair company before paying for any service.
