You sit down to look at your credit report for the first time.
If you're scores are above 720, congratulations! You have
excellent credit; stop worrying. If you're scores are not above
700, no problem--let's get to work. Take solace in the fact that
the national average score is around 676 according to the Gallup
Organization. If you're scores are below 400, 500, or 600,
there's definitely room for improvement and only one way to
go--up!
If the numbers I've mentioned don't make any sense to you or you
have no idea what they mean, don't fret--I'll explain. Credit
scores range from 350 to 850. All three of the credit
bureaus--Equifax, Experian, and Transunion--offer FICO credit
scores using a complex mathematical formula developed by Fair,
Isaac and Company, but they each give the scores a different
name: At Equifax, the FICO is known as the Beacon credit score;
at TransUnion, it's called Empirica; and at Experian, it's
called the Experian/Fair, Isaac Risk Model.
If you're credit scores are above 720 you have excellent credit
and will able to get the best interest rates available. As your
credit scores drop, the interest rate you'll receive for a home
loan will rise: this is known as tiered pricing. The more of a
risk the lender takes on you, the higher your interest rate will
be. In addition, all lenders have their own break points between
tiers. What this means is that one lender may raise the interest
rate if a score drops below 700, while another lender won't give
a higher rate until the score drops below 690. In summation, you
should do everything in your power to maintain good credit
scores, and be sure to shop around and do your homework when
looking for a home loan because all lenders are not created
equal. I think you've already gleaned the moral of the article
but just in case you haven't, here it is: Good credit scores
save lots and lots of money, and be sure to choose a lender
wisely to get the best rate for your scores.
About the author:
Brian Daniel is a loan officer/marketing coordinator for
Bend Mortgage Group
Ltd. a provider of home loans and mortgages for the state of
Oregon. For more useful tips and articles, visit
www.bendmortgagegroup.com
