First-Timer Primer: The Credit Score Basics

by UrbanTurf Staff

First-Timer Primer: The Credit Score Basics: Figure 1

This week in First-Timer Primer, we’re taking a basic look at credit scores, which you’ll need to be familiar with in order to secure a mortgage. We’ve talked before about how a small mistake can make a big difference when it comes to your credit score. Now we’ll look at how to understand your score and maintain one that will enable you to secure a good interest rate on your mortgage.

How a Credit Score is Determined

Your mortgage FICO score comes courtesy of three credit bureaus: Experian, Transunion and Equifax. More than 30 factors and criteria determine your score at each bureau, according to Jennifer Landgraff of Caliber Home Loans. The majority, or 65 percent, of the score is based on two factors, Landraff says: Your utilization rate, which is the balance of your credit card compared to its total limit; and your payment history. To have a great score, most experts recommend keeping your utilization rate below 30 percent, meaning the balance on your card at the end of the month shouldn’t exceed 30 percent of your limit.

How to Build Credit

In order to start building credit, you’ll need at least six months of credit history and at least one account with activity in those past six months. “A simple credit building strategy would be to make timely payments and keep balances low on credit card accounts,” Landgraff said.

What Hurts a Credit Score?

Unfortunately, plenty of things can have a negative impact on your credit score. They include late payments and any overdue payments that have been sent to a collection agency, as well as judgments, tax liens and bankruptcies. Landgraff points out that the past six months of credit history plays the most important part in determining your credit score. So even if you have some negative credit history in your past, it’s not too late to start building up your score again.

How Long Does It Take to Turn a Good Score into a Great One?

If you’re already doing well on the credit front, it may not take very long to raise your score.

“I have worked with clients where I have been able to increase their credit score in a week, but other cases it might take two months depending on the score and what needs to be done to improve it,” Landgraff said. That may include paying down a credit balance or updating and correcting inaccurate information that’s contributing to a poorer score.

What Score Secures the Best Mortgage Rate?

If you want the best possible interest rate on a conventional loan, you’ll want a score of 740 and higher on your credit report. But note that you don’t need to have a score that high to get a decent rate when dealing with some lenders. To secure an FHA loan, for example, you don’t need such a high score, though having it can’t hurt.

How Can I Find Out What My Credit Score Is?

You can go to AnnualCreditReport.com to get a free copy of your credit report from all three credit-reporting bureaus once a year. This site is government-recommended and your best bet for avoiding credit report scam sites, but it won’t tell you your numerical credit score. Still, it’s worthwhile because the report gives you an idea of whether or not you have any inaccurate information on your report that needs clearing up before you start pursuing that home loan. There are free services that will tell you what your Experian, Transunion or Equifax credit score is, but make sure you vet these sites before supplying your personal information, and don’t use a service that requires you to hand out a credit card.

FICO offers a paid service to view your credit scores from each of the three major bureaus, but it’s pricey. Quizzle is a free service recommended by many because it gives you access to both a new VantageScore credit score and Equifax report every six months. Your VantageScore is different from your FICO score — you can look into the differences here.

Lenders still generally use FICO, though, so while the free insight into your credit report provided by sites like Quizzle may be helpful, it won’t necessarily give you an accurate read on what to expect when you walk into the lending office. For that, you may need to work with a lender or pay FICO for the privilege.

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This article originally published at https://dc.urbanturf.com/articles/blog/first-timer_primer_credit_score_basics/8950


  1. 4 Brothers Buy Houses said at 2:39 pm on Wednesday September 17, 2014:
    Credit Karma should be mentioned. A great way to get a free peek at your score every week, monitor accounts, and really dissect your performance. I love it! Plus it doesn't count towards any "hard" inquiries when you use it. Another tip for folks with higher score (to make them even higher) is simply asking your bank for credit line increases. Even though you won't use them, this will bump up your score rather quickly.
  1. Kes said at 3:55 pm on Thursday September 18, 2014:
    Asking for credit line increases can help out with keeping your balance below 30% utilization, but you should find out if your bank or credit card company will do a hard credit inquiry before granting an increase, which can ding your score, especially if you have a few inquiries on there already from opening new accounts to build credit. Bank of America, for example, does a hard credit inquiry every time. Those inquiries last for two years each.
  1. christyb said at 5:07 pm on Sunday September 21, 2014:
    My husband and I found out through a rude awakening that Bank of America owns its credit reporting agency called Landsafe. On the same day that Protect my ID (a service provided by Experian) had my scores as Experian 742; Equifax 773; and Trans Union 769; the Bank of America Landsafe reported my scores as Experian/Fair Isaac as 714; Equifax Beacon as 709; and Trans Union Fico Classic as 758. Since they use the mid-score for their computations, they designated my FICO as 714. They also went into my credit report 8 times (and all of them hard) in one month and charged me with too many inquiries when my credit file had not had but 2 inquiries in the past 4 years. In addition, we have not had one late payment on record of any kind in 30 years at any of the credit bureau reporting agencies. Bank of America's response is that they take the reports from the credit bureaus and do their own analyses and come up with their Landsafe Credit Merge Report and use the midscore (which in my case resulted in the 714 rather than the 742 reported by Experian to me on the same day. I would greatly appreciate it if anyone could assist me in making some sense in all of this because I just don't know where to turn. Is it indeed legal for Bank of America to use its own credit bureau's figures? Why should that not be a conflict of interest?

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