How Credit Score Information is Calculated

Calculating your credit

Your credit score affects your ability to borrow money and influences the interest you’ll pay on that loan. Most people don’t know how these scores are calculated. Here’s what you need to know.

All Credit Scores are Not the Same

People often assume their credit score is a single three-digit number. In truth each of the three major credit bureaus, Experian, Equifax and TransUnion, score you differently since they don’t have the exact same data. Be clear where your ratings come from when sharing your scores. 

Closing Accounts Won’t Always Boost Scores

Closing old or inactive accounts may inadvertently lower your credit score because your credit history appears shorter. If you want to simplify, close newer credit accounts first.

Paying Off a Debt Doesn’t Remove it from Your History 

Once a debt goes to collection, or you’ve established a history of late payments, your credit score is impacted even if you pay off what you owe. While your score will get a boost if you pay off an old debt, it may not be by as much as you think. The best way to increase your credit score is to make payments on time every month.

Co-signing a Loan Impacts Your Scores

When you co-sign for someone else’s loan, you are ultimately responsible for the debt. If the person you’re co-signed with does not pay, your credit score will be impacted. Determine ahead of time if the person you’re co-signing with can afford the loan and if it’s worth the risk to your own credit score.

Not sure who to trust when making decisions that could affect your credit score? Refer to a Mel Foster Co. agent for guidance.

Five Tips For First Time Buyers

Say goodbye to throwing away rent money every month and hello to owning your own home. It’s an exciting time in your life and following a few simple tips can make it a rewarding experience.

1. Know what you can afford.

Gather one year’s worth of your household expenses. Include credit card payments, loans, auto insurance, groceries, utilities and entertainment expenses for each month. All money that goes out each month needs to be tracked, even that $4 coffee once a week. Figure your monthly take home pay, minus the list of expenses, and that gives you a ballpark figure of what you can afford to spend. But remember, this includes your monthly mortgage, taxes, insurance and maintenance. Be sure to leave a cushion for emergencies.

2. Get pre-approved.

This step includes having lenders scrutinize your credit history and score, so make sure your credit history is accurate before this step. Read our blog, How To Prepare For Pre-qualification, for help in getting ready for this step. (include hyperlink to Dec 11 blog article,

3. Make a want vs. need list.

Set realistic priorities and make clear distinction between what you really need versus what you want. Your need list includes things you cannot live without and will be different for each person. Commute time and number of bedrooms usually fall into the need category. Stainless appliances could be added in the future, so they fall into the want category.

4. Scope out the hood.

Gather information about taxes, schools and crime rates from the neighborhoods you are considering. Take a drive through the neighborhood at night and ask yourself, “Would I feel comfortable walking alone at night in this neighborhood?” If you see neighbors outside during one of your drive bys, stop and ask about the area. Find out if there is a dog that barks all day, a loud motorcycle that starts at 5 am or neighbors who like to have loud parties well into the night.

5. Find a trustworthy home inspector.

It’s wise to always have a home inspection before you buy. There could be dangers hidden behind walls, even in new construction. It’s always better to know about potentially costly repairs before you buy a property. You can also use that the home inspector finds as leverage when submitting an offer. Sellers are often willing to fix issues before you move in as part of the sales agreement.

What’s hiding behind those walls?


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