Here’s a typical scenario: You and your spouse are applying for a mortgage loan. You’ve had credit for years with three or four credit cards, a car loan and a line of credit. You always pay the minimum obligation, and always on time. Your spouse, on the other hand, doesn’t use much credit, perhaps has only two or three credit lines and has missed a payment or two in the past two years. The lender pulls your credit report and your spouse has a higher score than you. Here’s why that happens.
First of all, a credit report is a “snapshot” of you and your credit history. The report includes personal information, employment information, credit information, information about judgments and collections, as well as a list of companies that have requested a credit report. Your credit score is a number from 300 to 900, which the lender uses to determine your risk factor. For example, a score of 680 means 680 people out of 900 are likely to repay their debt.
So, how do the credit bureaus determine these scores? They use five factors.
To know more about credit scores and how to get your report, call me today.
It's me again! I will be posting articles with more in depth information regarding specific mortgage scenarios. I do my best writing when my kids are asleep...