on February 21st, 2011
The most common score reasons
These are the most frequently given score reasons by lenders when they deny your credit. Note that the specific wording given by your lender may be different.
- Serious delinquency.
- Serious delinquency, and public record or collection filed.
- Derogatory public record or collection filed.
- Time since delinquency is too recent or unknown.
- Level of delinquency on accounts.
- Number of accounts with delinquency.
- Amount owed on accounts.
- Too many accounts with balances.
Proportion of balances to credit limits on revolving accts is too high.
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on February 20th, 2011
When a lender receives your FICO score, up to four “score reason codes” are also delivered.
If the lender rejects your request for credit, and your FICO score was part of the reason, these score reasons can help the lender tell you why your score wasn’t higher.
These score reasons are more useful than the score itself in helping you determine whether your credit report might contain errors, and how you might improve your score over time.
However, if you already have a high score (for example, in the mid-700s or higher) some of the reasons may not be very helpful, as they may be marginal factors related to length of credit history, new credit, and types of credit in use.
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on February 18th, 2011
Interpreting Your Scores
A credit score is a numeric summary of your credit history, it generally ranges between 300 and 850. But what does the number mean to you?
What’s a good score?
There is no single “cutoff” score used by all lenders, and there are many additional factors besides your credit score that lenders use to determine whether to give you credit and at what interest rate. So it’s hard to say what a good score is outside of a particular lending situation.
For example, one auto lender may offer lower interest rates to people with scores above, say, 680; another lender may use 720, and so on. Talk to your Wells Fargo loan officer for guidance.
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on February 15th, 2011
What does not affect your score?
Lenders look at many things when making a credit decision, including your income, employment history, and the kind of credit you’re requesting.
But none of those factors are included in your FICO score. And neither the lender nor your score considers your race, religion, sex, marital status, age, or if you receive public assistance.
FICO scores also ignore self-inquiries, so checking your own credit report will not lower your credit score. In fact, it’s a good idea to check your credit report once a year to make sure there are no mistakes.
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on February 14th, 2011
Types of credit in use: is it a “healthy” mix?
Approximately 10% of your score – Your FICO score will reflect your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans, etc. While a healthy mix will improve your score, it’s not necessary to have one of each, and it’s not a good idea to open accounts you don’t intend to use.
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on February 12th, 2011
New credit: are you taking on more debt?
Approximately 10% of your score – Opening several credit accounts in a short period of time can represent a greater risk, especially for those with newer credit histories.
According to Fair Isaac Corporation, FICO scores try to distinguish between an attempt to obtain many new credit accounts and an attempt to obtain the best interest rate.
FICO scores generally do not associate higher risk with shopping for the best interest rate.
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on February 10th, 2011
Length of your credit history: how established is it?
Approximately 15% of your score – In general, a more seasoned credit history will increase your FICO score.
Lenders want to see that you can responsibly manage your credit accounts over time. However, even those people who have not used credit for an extended period of time may get high scores, depending on how the other information in their credit report appears.
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on February 9th, 2011
Amounts that you owe: how much is too much?
Approximately 30% of your score – Part of the science of credit scoring is determining how much debt is too much: In some cases, having a very small balance without missing payments shows you’ve managed credit responsibly, and may be slightly better than having no balance at all.
While you don’t want to have too many accounts open, it’s good to have more than one, so that you’re not using too much of one account’s available credit limit.
Owing a lot of money on numerous accounts suggests to lenders that you may be overextended and more likely to make late payments – or make no payments at all.
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on February 7th, 2011
Your payment history: what is your track record?
Approximately 35% of your score – The most significant impact on your score is whether you have paid past accounts in a timely manner (on or before the date the payment was due).
However, an overall good credit profile can outweigh a few late payments, and late payments have less impact over time.
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on February 6th, 2011
Okay, we pulled our credit report; we are browsing through it but can’t figure out what we are looking at. I pulled the following information off the Wells Fargo Website at www.WellsFargo.com to give us some direction;
Factors that Affect Your Scores
Many lenders use a FICO® score – a numeric calculation of your credit report calculated by Fair Isaac Corporation – to obtain a fast, objective measure of your credit risk.
By understanding the factors that can help or hurt your score, you’ll have a better understanding of how lenders view you as a credit risk – and how you can improve your score. Here are the five factors that determine your FICO score.
The levels of importance shown here are for the general population, and will be different for each individual:
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