Under the old model, most mortgage lenders use FICO credit scores because Fannie Mae and Freddie Mac require it. With this, the three major credit bureaus—TransUnion, Equifax, and Experian — your FICO score came from:
- Payment history—35% recent history weighted a bit more heavily than the distant past.
- Debt utilization—30% amount of debt outstanding as a percentage of the total.
- Credit history—15% how long the borrower has been a ‘good’ credit user.
- Recent credit searches—10%
- Types of credit—10% i.e. ‘mix’
VantageScore is the main source for approving credit cards.
VantageScore uses trended data.
- PLUS: Trended data gives a higher score when paying down debt vs minimum payment each month &/or debt increasing.
- MINUS: Traditional high score borrowers often carry several cards with high limits, resulting in lower scores under the new system, because of potential to run up credit card debt quickly.
~ today’s tip from your NetWorth Portfolio Broker ~
CREDIT SCORES: Not only affect your ability to GET a mortgage, it affects: all loan rates/ cost of and ability to get insurance/ job applications. I’ve seen folks pay a 10 fold+ increase on their insurance policies just by ‘letting it go back to the bank’ (and yes, bank can come after you years later)
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