How is my credit score determined?

By Amy Smith, Mortgage Planner

 

Credit scores are driving forces for nearly everything these days.  A low credit score may mean having to put a deposit down when opening utilities or not being able to obtain new credit for an auto loan, credit cards or a new home.  With a low credit score you can also count on higher rates on any new financing.  Here’s a breakdown of how your credit score is derived:

1. Payment History – 35% Impact – Paying debt on time and in full are positive marks on your credit report.  Late payments, collections and judgments all have a negative impact on your credit score.
2. Outstanding Credit Card Balances – 30% Impact – A high outstanding balance compared to the available credit can have a big impact on your score, especially if multiple accounts have balances that exceed 50% of the available credit.
3.   Credit History – 15% Impact – The longer you have credit the better your score. 
4. Type of Credit – 10% Impact – A mix of loans (auto, student, credit)  is always better than having a high concentration of one type of loan, especially credit cards
5. Inquiries – 10% Impact – This is based on how many people have pulled your credit in the last 12 months.  If you pull your own credit there is not an impact to your score.

There are quite a number of credit sites that will monitor your credit scores/report for you.  You can also access a free credit report from each bureau through www.annualcreditreport.com once a year.  For a more information on the points above you can click here. Feel free to also visit us online to try our mortgage calculators, request a copy of our insider's guide to credit scoring and home financing, request a copy of our  homebuyers guide or get started on your mortgage application!

What Perks Does Your Favorite Credit Card Offer?

Last week, the Federal Reserve pledged to leave the Fed Funds Rate near 0.000 percent until at least mid-2013. For credit card holders in DC who carry a monthly balance, this is good news. Because of the Fed's call, credit card rates are unlikely to rise before mid-2013.

But cardholders can save on more than just interest costs, as you'll learn from this two-and-a-half minute piece with NBC's The Today Show. In the interview, you'll hear about "built-in" perks offered by most credit cards and ways by which you can save on everyday goods and services.

For example, did you know your everyday credit card might offer:

• Travel perks : Automatic trip cancellation protection and car rental insurance.
• Shopping perks : Discount admission to concerts and museums; free shipping from overseas.
• Consumer perks : Price protection against a drop in price; insurance against theft; extended warranties.

And it's not just "high end" cards that offer these options, either. Credit cards of all types do what they can to improve consumer loyalty. Offering free perks is just one way in which they try.

Most credit cards offer websites detailing cardmember perks and benefits. Visit the site of your favorite card and see where you might save on everyday items.