If you ever want to refinance your home, buy a car or make a large purchase on credit you need to be concerned about FICO scores. The higher the FICO score the better chance you have of getting an excellent rate from the bank you will be using. Most people never pay attention to their FICO scores until they go to the bank to make a loan. This score is the first thing the creditor looks at before starting any paperwork on a loan. To get an excellent loan rate your score should be higher than 650. Anything over 700 is considered adequate and will usually work on getting you an excellent rate.
Credit scores are counted by the following method:
35% for payment History: Have you paid your bills in the last 30 days and do you have any late payments
30% for Amounts owed: If you have credit cards, equity loans, or lender loans, how much of the loan amount do you owe or on a credit line how much have you used up. If you possess five credit cards with a $5000 maximum line of credit and owe $5000 on each card, this will result in a much lower credit score.
15% for Length of Credit History: The longer period that the bank can measure your credit, the better for your credit score. The banks want to see that you pay your bills.
10% for New Credit: If you are constantly opening new credit lines with department stores, this will lower your credit score. These credit cards have low limits and when you use the maximum amount of credit it will make large decreases in your credit score.
10% for the type of credit you have: Credit with high risk lenders, loan sharks, and possess many credit cards, will have a lowering effect on your credit score.
The things that damage your credit score the most are late payments, collections, Bankruptcies, foreclosures, tax liens and judgments. If you have any of these types of credit accounts you will see credit scores in the low 500's and not sufficient to receive a loan from current lenders.
It make good sense, if you have a lot of high interest loans, high loan to value credit cards and collections, to refinance your home or take out an equity line and pay off these small loans. This action can raise your FICO score dramatically and make it possible to get approval from a bank for a better loan rate.
There are professional people in the marketplace that specialize in improving your credit scores. It pays to work with these people and get your credit scores raised. Just an increase of one percentage point on your loan of $500,000 can save approximately $20,000 per year.
Ron Accornero has become known as one of Villa Park's most respected real estate professionals, and Ronald Accornero has spent nearly three decades earning the trust of clients and colleagues alike. A strong educational background, paired with extensive sales and management experience, have proved an excellent foundation upon which to build his career as a Realtor® and broker. Today, as president and founder of Signature Properties of Orange County, Ron serves as a source of inspiration and leadership to his growing group of agents, and maintains a role as a community leader and supporter.
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