Credit Scores Ep7

anthony patton

Let’s talk about CREDIT and specifically credit scores…. Every lender uses credit scores to decide if they will grant you a loan… and what the interest rates will be… It doesn’t matter if you need a credit card or a loan to buy a car or a mortgage to buy a house. WHY!? The credit agencies compare everyone’s credit situations and have built a computer program that predicts the future credit performance based on the credit past.

The program then tells a lender the likelihood you will pay on time…. Someone with a 560 credit score is less likely to pay on time than a 720 credit score person. The credit scores range between 350-850 and are associated with the overall historical performance of a given profile… WHAT ??! The computer algorithm looks at your credit profile and decides a number based on what it sees… and it gets that number from similar profiles and pay histories of all the other people. There are lots of factors that determine the number…. including payment history if you are paying on time or if you are 30 days or 60 days or 90 days late.

The amount of debt meaning how much you actually own vs your credit limits

Credit history length meaning have you had credit for 3 weeks, 3 years or 30 years…

Amount of new credit have you opened a bunch of new credit cards or car loans recently

And credit mix… what type of credit do you have? Is it all credit cards or student loans or a mix of everything….

And how many inquiries have you had recently… are you out shopping for a car or house or both?

The main driver in score primarily is pay history…. But it is followed closely by amount of credit owed vs amount of credit limit

Typically above 600 credit score will qualify for a house but the better the credit score the better the rate…. Above 640 gets a better rate… above 680 gets a better rate that 640 and then above 720 will get a better rate than 680…

Here is the great news Because a credit score is computer generated we have tools that help us analyze where your scores are today and what we can do to improve them by running a WHAT IF Credit score tool….

Just last month we had a client with a 620 credit score…. They had an ok situation but with a little help from our tool we were able to identify two small changes that boosted their credit score from 620 to 680 this lowered their interest rate .50 a point and lowered their monthly payment $50

Credit card debt is bad… mainly because they monitor your scores and if things get a little out of line they start raising the interest rate on your credit card making them more money…. And possibly placing you in a worse position. If there is a way to get your credit card debt down you will be better off…. However, if you pay it to zero…. Sometimes we can see the credit score drop because the system doesn’t give you enough points for paid off debt… remember this is a computer… a zero credit card balance with a 5000 credit limit is potentially riskier than a 1000 credit card balance with a 2000 credit limit…. Make sense?

I feel like I say this every episode…. Stay off click bait sites and fake new sites like kredit karma… #1 they are not giving you the real credit score and #2 they are just trying to sell you something… and I know people say oh but its free…. Uh no its not… there are only a few free websites…. And even they want something…. Either money or information…..

Historically noncredit users were penalized... so if you didn’t have a credit card you had no credit score so you couldn’t buy anything because of the zero credit score…. Well how do you get a credit score if you can’t buy anything because you have no score??

We can help with that…. 1 you don’t have to have a credit score…. 2 we can now build a credit score using your checking and savings information….

If you don’t know yo