For Your Information
A credit score gives a lender a fast, objective measurement of an applicant's credit risk. Using a credit score has become a popular tool to help lenders make a decision about loaning funds because it is fast, consistent and unbiased. The Fair Isaac Credit Bureau score (FICOsm) was designed to measure the relative degree of risk a potential borrower represents to a lender, based on extensive research into credit using patterns and actual credit data. A consumer's FICO score is calculated from credit data contained in a repository's files. The score does not include income, assets, or any demographic data in its calculation.
What Determines A Credit Score
- Payment History
- Public Records
- Credit History
- Pursuit of New Credit
- Types of Credit in Use
- Outstanding Debt
A Fair Isaac Credit Bureau score ranges from approximately 375 to 900. A higher score indicates the borrower has better credit quality, meaning they are less likely to default on a loan. In other words, a borrower with a score of 680 is less likely to default than a borrower with a score of 650. The Fair Isaac score models at each credit bureau are similar and scaled to indicatre a similar level of risk.
Scoring Factors
A credit report may be requested with or without a credit score. Each report with a credit score is accompanied by the top four reasons the score is not higher. These score factors can be relayed back to the borrower to explain how they can improve their credit rating over time.
Inquiries
Consumers shopping for a new auto or home loan may have their application presented to a number of lenders in a short period of time, resulting in many inquiries. To minimize the negative impact of shopping for credit, auto and mortgage-related inquires that occur within a 14-day period are treated as a single inquiry. In addition, the model uses an "inquiry buffer" that ignores all mortgage and auto related inquiries within 30 days of the scoring.
Responding to Consumer Disputes
A credit score is generated using information at one of the three national credit respositories. A "Summary of Consumer Rights" is included with all credit report disclosures, and Mortgageclose.Com, Inc. Customer Services Specialists are avaliable to assist with the dispute resolution process. Customers who dispute information on a credit report should contact the agency that developed the report. The Fair Credit Reporting Act (FCRA) allows a credit reporting agency a "reasonable period of time" (generally 30 days) to reinvestigate consumer disputed items. Errors on a credit report must be corrected by the credit repository that generated the information.
