Analyzing Credit Scores of Applicants

When lenders talk about “your score,” they usually mean the FICO score developed by the Fair Isaac Corporation. It is today’s most commonly used system. FICO scores range from 350-850, and most people score in the 600s and 700s (higher FICO scores are better). Lenders and landlords obtain FICO scores from the three national credit reporting agencies Equifax, Experian and TransUnion.

In the eyes of most lenders, FICO credit scores above 700 are a very good sign of good financial health. FICO scores below 600 indicate high risk to lenders and could lead lenders to charge much higher rates and landlords to turn down the rental application.

As a rule, credit scores analyze the credit-related information on your credit report. How they do this varies. Since FICO scores are frequently used, here is how these scores assess what is on your credit report.

1. Your payment history—about 35% of a FICO score. Have you paid your credit accounts on time? Late payments, bankruptcies, and other negative items can hurt your credit score. But a solid record of on-time payments helps your score.

2. How much you owe—about 30% of a FICO score. FICO scores look at the amounts you owe on all your accounts, the number of accounts with balances, and how much of your available credit you are using. The more you owe compared to your credit limit, the lower your score will be.

3. Length of your credit history—about 15% of a FICO score. A longer credit history will increase your score. However, you can get a high score with a short credit history if the rest of your credit report shows responsible credit management.

4. New credit—about 10% of a FICO score. If you have recently applied for or opened new credit accounts, your credit score will weigh this fact against the rest of your credit history. FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur. If you need a loan, do your rate shopping within a focused period of time, such as 30 days, to avoid lowering your FICO score.

5. Other factors—about 10% of a FICO score. Several minor factors also can influence your score. For example, having a mix of credit types on your credit report—credit cards, installment loans such as mortgage or auto loan, and personal lines of credit—is normal for people with longer credit histories and can add slightly to their scores.

By law, credit scores may not consider your race, color, religion, national origin, sex and marital status, and whether you receive public assistance or exercise any consumer right under the Federal Equal Credit Opportunity Act or Fair Credit Reporting Act.

In addition to FICO, there are other types of credit scores. They are developed by independent companies, credit reporting agencies, and even some lenders. As a rule, the higher the score the better.

Each credit reporting agency calculates your score and each score may be different because the credit history each agency has about you may be different. Lenders may make a credit card or auto loan decision based on a single agency’s score, although others such as mortgage lenders often will look at all three scores.

Your credit score changes when your information changes at that credit reporting agency. This means a poor credit score can improve over time by a person improving how they handle their finances.




TMHA to Receive Funds to House Disabled Homeless Individuals & Families

Tuscarawas Metropolitan Housing Authority has been informed by the Department of Housing and Urban Development (HUD) that TMHA has successfully applied for and will be receiving $262,440 over five years for the Shelter + Care program which is a nationwide initiative by the federal government to end homelessness. Shelter + Care funds will provide housing vouchers for disabled homeless persons, while providing them with local case management services to stabilize the issues that led to the root causes of homelessness. To receive housing assistance with these funds, individuals most be both disabled and homeless. See the other side of the Owner Update for information on S+C, and how owners can participate in the Shelter + Care Program.
 

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