All About Credit Scores 
Important Information You Need to Know 

The Importance of Credit Scores 
Never before have our financial transactions been so closely monitored by the credit bureaus and used to determine our credit risk based on the credit score that is calculated. 

A credit score affects how much interest we pay on mortgages, consumer loans, credit cards and more – to the extent that the difference between a good score and a bad one can be tens or even hundreds of thousands of dollars over our adult lives. 

A credit score can affect your ability to get a job, a cell phone, rent an apartment, how much you pay for insurance or even opening a bank account. It's been described as your financial DNA. 

To many - ignorance is bliss until reality hits home with the discovery of a bad credit score. – A major letdown when it comes to buying a home, car or finding a job. For most consumers, the credit scoring system is a huge mystery maze. Here is some help: 

Types of Credit Scores 
FACT: All credit scores are not created equal. 
FACT: The credit score you should pay attention to is the FICO® score. 

There are all kinds of promotions on the internet offering free credit scores, credit monitoring and other such services. The key to remember is that the score used by major lenders and about 90 of the top 100 financial institutions in the U.S. is the FICO® score. 

It's the worldwide standard for measuring credit risk, based on a formula developed by Fair Isaac Corporation. FICO® scores range from 300 to 850, the higher the better. Other companies are selling credit scores based on their own models with different scoring ranges. 

The best place to get your FICO® score is straight from the company at myFICO.com or if you have applied for a loan, ask your lender to give it to you. Under federal legislation, every credit bureau is required to give consumers one free credit report per year (visit annualcreditreport.com), but not a free credit score. Keep in the mind the major credit bureaus sell credit scores based on models that are different than FICO®. The closest to FICO® of the three is Equifax. TransUnion and Experian sell the Vantage Score, with a range of 501-980. 

The Importance of Checking Your Credit Score 
Lenders will obtain your FICO® score based on your credit reports from each of the big three bureaus and use these scores to determine your credit risk. Your credit reports may vary with each bureau as they may not have identical data and sometimes there are errors on your credit reports that can affect your credit score. 

Unless you find these errors and take action to remove them from your credit reports, they will stay there.That's why checking your credit reports at least once a year is a wise move because you never know when you might have to borrow money and it's best to be prepared. This is vital if you aim to buy a house in the near future. If you discover your credit score is low, it can take months to raise it. 

Buying a home is probably the most expensive purchase that you will make in your lifetime and securing the best interest rate will make a huge difference over the life of the mortgage. Here is a recent example from June 2012 that illustrates how credit scores impacted the interest rate available on a 30-year fixed rate mortgage: 



Credit Score 
740+ 
720-739 
700-719 
680-699 
660-679 
640-659 
620-639 
<620 

interest rate 
3.750% 
3.875% 
3.990% 
4.125% 
4.250% 
4.375% 
4.500% (options are very limited for people with scores in this range) 
4.750% (and likely not able to be done) 


other ways your credit score can impact you 
almost everyone uses credit cards today and you can get in real trouble with huge interest charges. to get the best terms, you need a high credit score. 

need to get an apartment? a bad credit score can get you turned down or force you to pay more money up front to the landlord. 

corelogic is a company that is tracking evictions, child support payments, payday loan applications and property tax liens. it's being offered to mortgage and home equity lenders as an additional tool to screen applicants for credit risk. 

maintaining a good credit score 
the single greatest factor is payment history, so pay your bills on time. 

debt load is the next most important factor. try to keep credit balances at zero, but if that's not possible try to keep the balance owing at no more than 30 percent. the other factors include length of credit history, types of credit , and inquiries for new credit. 

a few pitfalls to avoid include: 
■don't close an inactive credit card account as it could raise your overall debt-to-credit ratio and lower your credit score. 
■don't co-sign a loan unless you are prepared to risk lowering your credit score should the other person default. 
■don't max out or exceed credit card limits. 
■ 
■this was written with the help of mortgage and credit consultants 

the harriet martin team 
fortune international realty inc. 
www.harrietmartin.com 
mlhssouthflorida.com 
305-528-5558 
305-385-1203