Mortgage Everett: How Is Your Credit Score Calculated
Part 2 of 2
Debt (30%): Continued: If you made your payment before the reporting date that would give you the extra 3 points you would need fro that score. If you have old delinquencies it may not help you to make payments on them. This is because if you don’t pay it off completely the old late payments become current and now your scores get dinged because now it a current late. If you pay off old delinquencies demand a Letter of Deletion. A Letter of Deletion removes that line of bad credit completely from your credit report. Watch for old collections and the statue of limitations. If the debt is more than 7 years old (most debts but not all) it must be removed. A common practice of debt collectors is to try a change that date to when they bought the debt. This is illegal.
Length of Credit History (15%): You might think that opening up a new line of credit would help your score. Watch out it can actually hurt you a great deal. Say you have a 3 year clean history with one account. Today you open up another account at a local department store. You suddenly have a 1.5 year clean history because they will average your history over the total open accounts. That could cause you to drop 10-15 points in one moment.
New Credit (10%): Every time you shop for a better deal, say on a car, your score is dinged 2-3 points. If the dealer sent your deal to several banks then each one dings you 2-3 points. Just stopping at one car dealer can cost you 20-30 points in less than an hour.
Type of Debt (10%): They are looking for a good mix of all three types of debt.
The way the various parts play against each other creates a dynamic and that creates your scores. It is a complex system that can be used to improve your scores but I suggest you hire a good professional to do that. I have several professionals that I refer my clients to. Remember that the FHA mortgage is not score driven but the better your score the better chance you have of getting a loan. You will find more helpful tips on my blog at Everett Mortgage on Line.
