Helayne Urban's credit score FAQ's

Q: What is a credit score?
A. A credit score is a number that is generated by mathematical algorithms to summarize
one’s historical credit information to measure default risk.

Q. What is a good credit score?
A. It depends on the type of loan one is applying for, and how much money you have for a down payment if it is a purchase, but most lenders today want to see a 700 or higher credit score. Some programs require 720; 740 or higher is terrific.

Q. Is there just one credit score?
A. No. There are many different credit scoring models, and different versions of even the most popular models. FICO is the most popular, but one lender may use FICO ’06 while another lender may have updated to the more recent version FICO ’08. The bottom line is to make sure your credit is as good as possible so you will have every credit score point you can get regardless of the scoring model being used.

Q. What goes into calculating a credit score?
A. There are five main factors that affect the calculation: Payment history (whether or not you pay your bills on time), Utilization (reported balance vs. reported limit/credit high ratio), Years of history, Mix of credit, and Inquiries.

Q. I’ve heard that having too many credit cards can hurt your credit score, should I close the accounts I don’t use anymore?
A. The answer depends on whether or not you have too many credit cards open for your credit profile; and if you should close accounts, choosing the accounts with knowledge as to which accounts will help your score versus hurt your score will be important to know. When one closes accounts, you affect years of history and utilization, so it’s wise to consult a scoring specialist as to the right action for you.

Q. Why don’t I have a credit score?
A. There must be enough reported information and credit activity to generate credit scores.

Q. If I had bad credit years ago, will that affect my credit today?
A. It could. Every derogatory item that gets reported has a statute of limitations, but often when you have bad debts (collection accounts, charge-offs), they get sold from the original creditor to collection agencies who can surface on a credit report even years later.

Q. If I co-sign a loan for someone else will that affect my credit score?
A. Yes, co-signing makes you just as responsible, from a credit reporting perspective, as if it were your loan alone.

Q. Does missing one tiny payment on a store card really affect my credit if I always pay my mortgage and larger bills on time?
A. Yes, if a recent 30 day late payment is reported you can loose as much as 100 points! (Even if it was over a $5 missed payment.)

Q. If I make a lot of money, won’t my income help raise my credit scores?
A. No, income is not calculated into credit scores.

Q. My credit score that I saw on line was much higher than the one my lender pulled when I was applying for a mortgage.
Is there something wrong with the score my lender pulled?
A. Consumer scores are typically higher than scores on lending reports. There are many different scoring models used, different versions of scoring models used, and different risk factors added in for different types of loans. There is nothing wrong with the score on the lender’s report, and that will be the score to determine loan approval and interest rate.

Q. Can I apply for a car loan or a new credit card if I am in the process of applying for a mortgage?
A. It’s not a good idea to apply for too many things at the same time. Your applications will create inquiries that will lower your credit scores. If you have too many “hard” inquiries with in a relatively short period of time, the number of points you loose for each inquiry will increase.

Q. Should I apply for a credit limit increase to improve my balance to limit ratio?
A. In theory this makes sense, but this is not a good idea to do right before you apply for financing since applying for a limit increase will create an inquiry which will typically cost you credit score points and in this lending market most creditors are not increasing limits right now. Long term, increasing limits could be a good idea.

Q. Instead of using a credit scoring expert, why shouldn’t I just challenge everything that is negative on my credit report myself or just hire one of those credit dispute companies that you hear advertise al the time?
A. Firstly, if one is only reviewing and challenging derogatory payment history issues, you are only addressing 1 category that makes up 35% of your score. A true scoring specialist will know how to address this area properly as well as the other factors that make up the remaining 65% of your score. Also, there are certain derogatory items that if they are challenged and not removed, they will verify with a more recent date causing your credit scores to actually go down. It is really important to work with someone who understands what should be addressed and what should not.

For more information, please contact Helayne Urban at Hurban@HUcreditcoach.com or 914-517-7575 x1036