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Why do I have different credit scores

Why do I have different credit scores - There are 3 different credit reporting agencies. Each one gives you a score. They work independent of each other.

Mortgage lenders typically look at your middle score as your qualifying score. there are some lenders that will take the high score into consideration as well. But as a general rule when applying for a mortgage always give the mortgage broker your middle score if you know it.

Usually a lender will use the middle of the three scores to qualify a borrower and to chose rate.

One creditor may report to only to bureaus A and B, another creditor may report to bureaus B and C, and yet another creditor may only report to bureau B. For this reason, the exact information that each of the credit bureaus has on file about you varies, and therefore so does your score with each bureau.

The primary reason for discrepancies in the three different credit scores is that each credit bureau uses a different scoring module. The scoring system used by Experian is the Fair, Issac module, the one used by Trans Union is called Empirica and Equifax uses a scoring system called Beacon.

You have three different scores because each bureau has a different system for placing a numerical value on your credit quality. Another reason these scores can vary so much is that some creditors only report to certain bureaus and therefore the other bureaus may not be scoring that particular credit file which can cause a difference in actual scoring.

There are nonconforming lenders that will use average your scores or even use the highest score. Your mortgage professional's job is to place you with the lender that would be most advantageous to you.

The information that the credit bureaus have on file about you is provided by the creditors who you currently have credit with, as well as the ones you've dealt with in the past several years.

When disputing incorrect information on your credit report, be sure to write to all three credit repositories. If only one is notified of the erroneous item, your scores from the other two bureaus would not improve.

Credit score differ because of the credit items that are being reported to each credit bureau, all 3 credit repositories are independent of each other, and because their are different credit scoring modules. Some creditors only report to 1 or 2 credit repositories while others may report to all 3. Trans Union is different from Equifax and they are both different from Experian. By all 3 being independent they all have their own individual credit scoring systems. Lastly, just like there are Windows 98, Windows 2000, Windows XP, etc... as operating systems for a computer, there are different versions of credit generation also. Some lenders may use an older credit operating system simply because it is cheaper to obtain credit reports than the latest credit operating system out available.

What are credit scores - A credit score analyzes your credit history by considering many factors. These include but are not limited to amount of debt, payment history and limit to balance ratios.

Credit scores can range from 350-900.

The number one factor in determining your credit score is your payment history. If you make payments 30 or more days late quite often you will have a much lower credit score. If you pay your bills on time then your credit score will demonstrate this and be much higher. Your payment history generally accounts for roughly 35-40 percent of your total score. Since your credit score is very important in many areas of your life, it is important to work hard at keeping your credit score high.

Your credit score is the number that creditors use to gauge your risk factor. The higher the number, the more likely you will be approved for your loan.

If you have a low credit scores be sure to check your credit report carefully; it may contain errors that are bringing down your score. If this is the case ask your preferred mortgage professional about correcting the errors.

Good Habits for Good Credit - There is little or no financial training or education provided to consumers. Most of what people learn about credit and finances is what they see from their parents or what they figure out from trial and error. Here are some habits that my customers with great credit do to keep their credit great.

Do not max. out your credit card balances on your credit cards. After you pay off your credit card balances do not close the credit cards associated. When you close the credit cards this shortens your credit history. By leaving them open you are able to establish a longer credit history and therefore increase your credit score.

Federal Legislation has required that each of the three (3) major credit agencies make your credit report available to you once per year. Simply check your credit report for errors, omissions, etc. by logging onto www.annualcreditreport.com and have access to your report from Equifax, Experian, and Trans Union. From there you can dispute inaccuracies and potentially get them removed, best of all it is overseen by the government and it's FREE!

A good credit score can be achieved by practicing prudent financial responsibility. Having good credit often qualifies you for better rates and more aggressive (LTV) loans.

Avoid offers such as "90 days same as cash", "no payments for one year", etc. Signing up for these kind of offers result in installment type credit accounts on your credit report. Having consumer installment type accounts can result in lowering your credit score.

Keep your credit card balances at 50% of the limit or lower. This will greatly affect your credit score in a positive way. This will also make it easier to pay off if need be.

Honor your agreements with vendors. Do not stop making installment payments because you are dissatisfied with an appliance you bought. Instead, try to resolve the issue with the vendor, even if it means going to court. Vendors who grant you credit on purchases can report to the credit agencies. Another common mistake people make is they stop honoring sales agreements they make with mobile phone companies. Many mobile phone carriers give away phones for free with a 1 or 2 year contract. People who break their contracts will be reported to credit bureaus.

If your credit score is lower than you expected, ask us about what steps you can take to improve your credit score to qualify for the loan programs you require. A debt consolidation loan can help pay off many of the debts such as credit card debt and monthly installments which are dragging your credit down, and regular payment of your new lower monthly mortgage payment will help raise your scores as well.

Once you make the decision to obtain a mortgage, refrain from seeking other types of credit, whether it be a car loan or a credit card. These inquiries can lower your credit score and increase your mortgage costs.

Online banking, online bill paying, direct deposit and automatic withdrawals.

Technology is a great habit to get into with your finances. If you can direct deposit to multiple accounts start putting your savings away before you even see it. If you can pay your bills with an automatic withdraw start to set it up, and stop trying to make time to pick up stamps, stop by the post office and drop off your mail.

Don't schedule one time of the month, or week to pay your bills and balance your check book, etc. Pay your bills as soon as you get them.

Credit inquiries can also have an affect on your score. Refrain from applying for too many credit cards, gas cards, or department store cards because too many inquiries can lower your score.

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