Scoring your Credit - How's your FICO Score? Know before you buy that manufactured home!
In today's increasingly automated society, it should come as no surprise that when you apply for a manufactured home mortgage loan, your ability to pay can be reduced to a single number. All the years you've been paying your mortgage, car payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.
All three of the major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. The best known is called the FICO score, based on a model developed by Fair Isaac and Company (hence the name) and used by Experian. Equifax's model is called BEACON, while TransUnion uses EMPIRICA. While each of the models considers a range of data available in your credit report, the primary factors are:
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Each of these, and other items, are assigned a value and a weight. The results are added up and distilled into a single number. FICO scores range from 300 to 850, with higher being better. Typical home buyers likely find their scores falling between 600 and 850.
FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.
What can you do about your FICO score? Unfortunately, not much. Since the score is based on a lifetime of credit history, it is difficult to make a significant change in the number with quick fixes. The most important thing is to know your FICO score and to ensure that your credit history is correct. Conveniently, Fair Isaac has created a web site (www.myFICO.com) that let's you do just that. For a reasonable fee, you can quickly get your FICO score from all three reporting agencies, along with your credit report. Also available is some helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score. Each of the credit services offers similar services on their web sites: www.equifax.com, www.experian.com, and www.transunion.com.
Armed with this information, you will be a more informed consumer and better positioned to obtain the most favorable mortgage available to you.
What is a credit score?
Before deciding on what terms MobileHomeLoan.biz will offer you on a loan (which they base on the "risk" to them), they want to know two things about you: your ability to pay back the loan, and your willingness to pay back the loan. For the first, they look at your income-to-debt obligation ratio. For your willingness to pay back the loan, they consult your credit score.
The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. (and they're named after their inventor!). Your FICO score is between 350 (high risk) and 850 (low risk).
Credit scores only consider the information contained in your credit profile. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. In fact, the fact they don't consider demographic factors is why they were invented in the first place. "Profiling" was as dirty a word when FICO scores were invented as it is now. Credit scoring was developed as a way to consider only what was relevant to somebody's willingness to repay a loan.
Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.
Different portions of your credit history are given different weights. Thirty-five percent of your FICO score is based on your specific payment history. Thirty percent is your current level of indebtedness. Fifteen percent each is the time your open credit has been in use (ten year old accounts are good, six month old ones aren't as good) and types of credit available to you (installment loans such as student loans, car loans, etc. versus revolving and debit accounts like credit cards). Finally, five percent is pursuit of new credit -- credit scores requested.
Your credit report must contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This ensures that there is enough information in your report to generate an accurate score. If you do not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a manufactured home mortgage.
The information in your credit report has a huge impact on whether or not you qualify for a mobile home mortgage loan and what interest rate MobileHomeLoan.biz can offer. Therefore, it’s important your credit report reflects a positive image of the way you manage your money. If you're getting ready to buy a home, checking your credit report is the best way to ensure you get the loan and interest rate you deserve.
The easiest way to see what’s in your credit report is to contact the three national credit reporting agencies – Equifax www.equifax.com,
Experian www.experian.comand TransUnion www.transunion.com - and request a copy from each. That’s because the three agencies are independent of each other and the information may differ on all three reports. In addition, you may not know which agency your lender will use to check your credit, so it’s best to verify that all three have correct information about your credit history.
If you've been denied credit, insurance, or employment because of information in your credit report from any of the three agencies, you can obtain a free credit report by contacting the agency within 60 days of receiving a denial notice. In addition, you're entitled to a free copy of your report each year when you certify in writing that (1) you're unemployed and looking for a job within 60 days, (2) you're currently on welfare, or (3) your report contains errors due to fraud. Otherwise, the agencies charge a fee for a copy of your report.
For additional fees, each agency may offer you different report variations, such as:
New law promotes free access to credit reports
Soon you'll be able to get your credit report for free regardless of your employment or financial situation. A recent amendment to the federal Fair Credit Reporting Act (FCRA) mandates that each agency provide you with a free copy of your credit report, at your request, once every year, from www.annualcreditreport.com.
Free reports will be phased in during a nine-month period, rolling from the West Coast to the East beginning
Here is a breakdown of eligibility for a free credit report:
Beginning December 1, 2004 - Consumers in Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming
Beginning
Beginning
Beginning September 1, 2005 - Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia, and West Virginia – the District of Columbia, Puerto Rico, and all U.S. territories.
Whether you are thinking of buying a home or simply curious about what’s in your credit report, it’s important to correct any errors you discover as soon as possible. You don’t want errors in your credit report affecting your eligibility for credit in the future.
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