The Facts About Your Credit
-- Posted: January 02,2007 | Brian Varvel
As consumers in today's market, credit is an integral part of life. They check your credit when you sign up for cellular service. They require a credit card when you rent a car or reserve a hotel room. So it's not just for large purchases such as cars and homes where good credit is essential; it affects everyday life.
Every time you apply for credit, make purchases on credit, or remit a payment, information is being added to your credit history - which in turn is being added to your credit score.
The most widely used credit score in America is the FICO® score. It is developed with information from consumer credit reporting agencies such as Experian, TransUnion and Equifax. Each of these agencies have their own names for their credit reports such as Beacon® and Empirica®. While you can get reports from each of these three companies, each may have different scores for you.
FICO® culls information from all three, applying their own calculations to to average the three sets of scores. What a FICOŽ score considers:
All of these variables are used cumatively with the chart above showing the general average weight of each category. However, FICO® scores will ultimately depend on the individual because most lenders will weigh any FICO® information with other information they collect from you such as your income, employment history, capital assets, and information about your checking and savings accounts. They will then use this information to determine your risk factor, the type of loan for which you qualify and the interest rate for which you are eligible.
Most lenders will pull your credit score twice. They'll pull your credit once at the time of application and again right before final loan approval immediately before they cut the check and send it to your escrow officer prior to close. Many consumers make the mistake of assuming their initial approval means they can start shopping for furniture to put into their new homes.
Any activity that alters your score between application and close can drastically alter your financial position and may disqualify you from the loan for which you had previously been approved. So make sure you steer clear of opening new charge accounts and purchasing anything on credit, especially high ticket items until AFTER you close on your home.
Identity Theft: We're All Potential Victims!
What is Identity Theft? Identity Theft is usually when someone steals your personal information and opens charge accounts in your name, runs up potentially thousands of dollars in charges and leaves you holding the bag. In most cases, victims only discover the problem when they apply for a loan and are denied credit.
This is why checking your credit regularly is so important. It's important that you take a proactive approach to preventing Identity Theft; repairing your credit and/or good name can take years.
Ways to Prevent Identity Theft:
- Opt-Out from Unsolicited Credit Card Offers
Those annoying credit card offers present opportunities for thieves to complete the application and submit it, opening credit accounts under your name! - Invest in a paper shredder
You never know who is going through your garbage looking at personal information! I prefer the type that shreds paper into small pieces, referred to as "cross-cut," not long strips that can be taped back together. - Consider a locking security mailbox
Available at any home improvement center. This way, you have more control of personal information since anyone can open a mailbox and steal bills and other mail with sensitive private information. - Secure Servers
Only make purchases on-line and over the phone with reputable companies who will guarantee a secure site and work with you in the event of fraudulent charges against your account.
What's the Score?
- What is a good Credit Score?
That depends on the lender. There isn't any set score. The higher the score, the better your credit, so someone with a score of 550 may not be as credit worthy as someone with a score of 750. Talk to your lender and find out what they look for. - Is bad credit a permanent thing that will haunt you forever?
No! Credit can always be repaired. For more on ways to repair and improve your credit, Visit MyFico.com! - How often should you check your credit score?
You should be checking your credit score as often as possible -- some recommend that you check as often as once a month. - How is identity theft associated with credit scores?
Identity theft is on the rise. Checking your credit often will show if anyone has applied for any new credit in your name -- before they actually obtain the credit, charge up and default - leaving you holding the bag. - Can your credit score be adversely affected if you check it too often?
No. They now make exceptions for people wanting to monitor their credit rating and allows an individual unlimited access to their information as long as you order it directly from a credit reporting agency like Experian, Equifax or TransUnion.
Credit Reporting Agencies:
Experian
888.397.3742
http://www.experian.com/
TransUnion
800.888.4213
http://www.transunion.com/
Equifax
800.685.1111
http://www.equifax.com/
Brian Varvel, At Home in Katy
Brian is the owner / operator of the At Home in Katy Team at Keller Williams Realty Katy @ Cinco Ranch. In addition to his real estate career, he is also a regular contributor to multiple websites on real estate and technology. Brian also takes great pride in serving on the Board for Cinco Charities, Inc. a non-profit organization serving the Katy area.
You can contact Brian at:
281.787.0930
brian@athomeinkaty.com
http://www.athomeinkaty.com
