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More Than A Score PDF Print E-mail
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A credit report is more than a score. Most mortgage credit reports are called "tri-merges," meaning they are combinations of credit reports from the three major credit bureaus (Experian, Equifax, and Trans-union). And while they provide your three scores, a tri-merged report gives you much more information than that.

Credit reports show payment histories, balances, available credit, and other information for most installment, revolving and mortgage accounts. They also show judgments, liens, bankruptcies, and collections. Credit reports show how many (if any) times your credit has been pulled over the past 90 days or more. Reports even have previous addresses, any AKAs, and what factors the bureaus used to calculate your score, along with contact information for your creditors and the three bureaus.

Recently I received an e-mail from a customer, who was embarrassed by her technically low credit score. While her score was low, I tried to explain to her that her credit wasn't that bad. Anything bad must be compensated for by a lot of good, and there just wasn't that much information there to begin with. Because she had a small credit file, her little bit of bad hurt her score a lot.

She was still upset, and I'm sure quite a bit frustrated. She is not a bad borrower to her creditors and doesn't owe a large amount of money to anyone. But a choice here or there, many of which were chosen with good intentions, negatively impacted her score. She didn't know. How could she know... the creditors don't educate consumers on how they calculate credit scores. In fact, the exact calculations each of the bureaus use for their various formulas are not public information. The most anyone can do is give you generalities... but those generalities go a long way.

Did you know closing a credit card with a zero balance can lower your credit score? Did you know closing an account with a balance, even if you continue to make timely payments can lower your score? Did you know that having multiple store-branded credit cards (Target card, Home Depot card, BestBuy card, etc) can lower your credit score? Two borrowers with the same amount of debt, the same available credit, and the same payment histories can have vastly different credit scores simply because of how the debt is distributed.

There are a lot of factors that contribute to your score, and thus your ability to borrow money or finance a home. I talk to people everyday who for one reason or another don't qualify for traditional mortgages or need some pointers on how credit scores work.

Don't get upset if your score is low. Your score is a measure lenders use in decided your ability to repay a loan. It is the only way they can make unbiased decisions on whether or not to lend an individual money. Credit scores do not measure your personal worth. Your score does not have any correlation with what type of person you are, how good of a parent you are, how likable you are, or if you are a good friend. It is a number calculated by some statistician's secret formula, and it weighs some factors in your credit past different than you might otherwise think.

If your score is not where you want it to be, don't be ashamed. It is a reality, and with knowledge, diligence, and a little bit of time it can change. It will change, with your help.

Keep checking HomeEquityNews.com for more information on your credit score and how it can be improved.

 
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