Credit Reporting Agencies & Your Credit Score

A credit reporting agency collects information about you and your credit history from public records, your creditors and other reliable sources and produces a credit score. These agencies make your credit history available to current and prospective mortgage lenders and employers who have permissible use to access your report.  You can get your free credit report annually.

You should check your credit each year by getting a free copy of your credit report ANNUALCREDITREPORT.COM

Your credit score is a reflection of your credit risk and can greatly affect the mortgage interest rate.

The better your credit the higher your score.  Credit Scores generally range between 300 and 850.

There are several credit scores but the FICO® score is most popular and credit scores are often generally called FICO scores like tissue paper is called Kleenex.

While the analysis done to derive your score is proprietary about 35% of it is based on how timely you  pay our bills.   The rest is based  how long credit has been established, how much debt you have utilized in relation to your available credit and how much debt you have in general.

CREDIT INQUIRIES  

A lender requests a credit report from a credit bureau whenever you apply for credit. This inquiry (or “credit pull”) then appears on your credit report and stays there for two years – potentially impacting your credit scores. However, some inquiries are more important than others. There are two types of credit inquiries: soft and hard.

Hard Inquiry
When shopping for a home loan, lenders will ask permission to pull your credit report. These inquiries are known as “hard pulls” and will remain on your report for two years but only impact your credit score for one year. Multiple inquiries in a short period of time can reduce your credit scores. 

What’s the impact of hard inquiries: When shopping for a mortgage you may allow multiple lenders to review your credit creating multiple inquiries. Usually they are pulled in a short period of time and are counted as one inquiry for scoring purposes. Inquiries can be a concern to lenders because multiple inquires could mean multiple opened loans and lender need to be sure you are not over-extended before they will provide financing for your home.

Soft Inquiry
Soft inquiries happen when a lender pulls your score without you directly applying for a loan and do not impact your credit scores. A soft pull is used in pre-approved offers that you might receive by mail or email. Soft inquiries also occur when you request your own credit report. They will remain on your report for two years but won’t impact your credit scores –only you can see who has done a soft inquiry.

RAPID RESCORE

This service is offered by credit companies who will work with the national credit reporting repositories and allows credit information to be updated in 3-5 days to help improve credit scores. They can forward documents supplied by the borrower directly to Equifax, TransUnion and Experian for a rush investigation and  the repositories will update credit information and trade lines on their credit reports.