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What is the most important thing you are ever going to purchase in your life time? A home. So who cares what Equifax considers a good credit score, it’s what the lenders think that counts. Your beacon score aka credit score ranges from 300 (low) to 900 (high). There are two governing bodies who monitor your credit scores. The first is called Equifax and the second is Transunion. We are going to focus on Equifax as the majority of lenders use Equifax over Transunion.
According to Equifax, 700 is considered nothing special but by mortgage lending standards, this will get you pretty much anything you want. What is the minimum requirement for a mortgage with great rates? 620 – 650 (through a mortgage broker) depending on the mortgage product you require. Most people fall into the 750 – 799 range (according to Equifax) which is pretty high if you ask me. Here’s where it gets interesting, a credit score of 850 can mean nothing!
Without an established history of payments and at least two trade lines (line of credit, student loan, credit card, car payment, etc), a high credit score can mean nothing. It takes time to establish a good credit score so start today if you haven’t already.
Your Equifax credit report is a compilation of information about you and your credit history that has been reported to Equifax by others, mostly by those who granted you credit. Your credit score, on the other hand, is a number calculated using the information in your credit report.
A credit score is a statistical formula that translates personal information from your credit report and other sources into a three-digit score. For example, when you fill out a loan application, pieces of information from the application along with information from your credit report will be used to compute a score that indicates to the lender the statistical probability that you will become delinquent on the loan.
There is no quick fix for removing past aspects of your credit history that may be negatively affecting your credit score.
Here are some tips to keeping a good credit score:
- Never go over your limit and try to keep your balance below 75% of the limit
- Always pay your bills on time
- Avoid applying for credit unless you have a genuine need for a new account. Minimize your inquiries
What are the most common factors that can negatively affect a credit score?
- Delinquency
- Public record or collection field
- Time since delinquency is too recent or unknown
- Level of delinquency on accounts is too high
- Number of accounts with delinquency is too high
- Amount owed too high on accounts
- Ratio of balances to credit limits on revolving accounts is too high
- Length of time accounts has been established is too short
- Too many accounts with balances
Will inaccurate information in my credit report affect my credit score? It certainly can depending on what is reported. If you want to correct inaccurate information on your Equifax report, download the Consumer Credit Report Update Form, which is used to correct inaccuracies. You can fax the completed form to (514) 355-8502.