How Credit Is Scored

Five sample factors for calculating credit scores are listed below, along with a sample of the importance each factor has to the total score. As you read through the list, think about how your credit might score today.

Payment History: 35%. What is your track record? Have your payments been made on time?

Outstanding Debt: 30%. How much do you owe? Do you have a high level of debt? Are you near the limit on your accounts?

Credit History: 15%. What is the length of your credit history? Has it only been a few years?

Pursuit of New Credit: 10%. Have you made numerous applications for new credit? Are you taking on more debt?

Types of Credit in Use: 10%. Do you use a variety of credit types? The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.

Calculating Your Score

So how does all this math work? Each factor is given a weight or level of importance. This weight is assigned as a percentage (such as 35%, as shown in the example above). The score is graded for each factor, and then each factor is multiplied by the weight. Computers calculate credit scores in an instant.

What If I Can't Get My Score?

Consumers have a right to know the specific reasons why an application for credit is rejected. There are no laws requiring lenders to reveal your credit score to you, but this is expected to change. Laws will be updated to reflect the influence and convenience of computers on consumer credit and spending patterns. But until then, it never hurts to ask. Some lenders will gladly share your score. Be sure to ask lots of questions and understand what the score means.



Understanding credit scoring

 

 

    Fannie Mae
    Freddie Mac
   
Ginnie Mae
   
VA
   
FTC
   
FDIC
   
FRB
   
HUD
   
Complaints

 

Discussion Forum

Recent Posts -

Ads

Home Loans
Homeowners - get fast, easy & free online mortgage answers.
www.jc-capital.net


Compare Mortgages

Search MortgageSector for Low Rate Loans! Get Info & Apply online here.
www.mortgagesector.com


Save Online

Compare offers on interest on adjustable mortgages. Get Started now!
www.rateadvisors.net

 

 


By visiting Allie Mae you have taken your first step toward becoming an educated borrower. Allie Mae is an objective, independent source of information for the mortgage consumer. Whether you are buying a home, refinancing, taking a home equity loan, building a home or in need of a mortgage for any purpose, Allie Mae is here to help. Allie Mae has helped thousands of people with their mortgage needs. We have a complete selection of articles, charts, calculators, and checklists designed to help you through the mortgage and home buying process.

© 2004 Copyright AllieMae. All Rights Reserved.
Privacy Policy   Legal  Terms & Conditions   Webmaster   Site Map    Application
About   Contact Us   Forum   Dictionary   Calculators   Articles   Free Content