What's Your Score?

What is your credit score?

Most consumers don't know or don't want to know. But with loans harder to come by and lending guidelines getting more stricter everyday, it more important now than ever before to make sure your credit score is as high as it can be. The days where if you had a pulse, you got a loan are gone. That's the kind of lending that got us into this economic crisis in the first place.

Another reason that you need to stay on top of your credit score is that 70% of the information that is on a credit report is either wrong or old. Can you imagine that? You could be turned down for a loan based on inaccurate information.

This lending thing is hard enough for most people. Let's not make it harder. Let's review some credit report basics.

Credit scores range from 350 to 850. The credit scores are an indication of risk. The lower the scores, the more risk a lender will have. Remember, whether we like the system or not, the credit report is the only tool lenders have to see how historically you have paid back your creditors.

The scores come from the 3 credit bureaus, (Equifax, Experian and Trans Union) who gather up payment history from your creditors (Mastercard, Visa, car payments, etc.....) and use this information based on 40 different pieces of criteria and come up with a score. This "score" is used by lenders to determine your risk factor.

Let's look at what impacts your credit score.

Payment History - 35% Impact.
This one is pretty easy and makes the most sense. On time payments help your scores while late payments kill credit scores. And the more it is late or recent will impact scores even more. And if the late payment is for a good sum of money, that will lower your score as well. I know it is common sense, but making payments on time really helps your score. No matter what the amount of the payment is.

Outstanding Credit Balances - 30% Impact
Keep your balances no more than 30% of your credit limit. I know that is hard to do in this credit crazy world, but keeping those balances below the 30% mark really helps your credit score. When your balance is over 30% of your credit limit, your credit score really takes a beating. For instance, at 30-5o%, your credit score can lose 5 to 25 points. If your balance is 50-75% of your credit limit, it can cost you 20 to 40 points on your score. And if you have a balance on your credit card between 75 - 100% of the high limit, it can cost your credit score 40 or more points!! Ouch!!

So keep those balances down. Way down.

Credit History - 15% Impact
This is the length of time you have had open credit with a creditor. Credit scoring loves longevity and consistency. Your credit score likes to see you have the same cards for many years. It doesn't like to see you have one card for 12 months then close it, then open another one and close it after a short period......etc. You get the picture.

Anytime I see a credit score near the 800 mark (and I haven't seen too many), I know that that person with that score has had the same cards or mortgages for many years without making many changes. You may have card that you have had for a long time but haven't used. Before you close that card, you may want to consider keeping it open and using it once in awhile to keep your scores higher. It's a shame when people close out cards that they have had for many years.

The other bad thing about opening new credit it that it cause inquires from lenders who pull your credit report. This also impacts your credit score but more on that later.

Type of Credit - 10% Impact
This one doesn't carry a lot of weight. But your credit score likes to see a good mix of debt. It's not always possible to do so don't worry about it but a good mix would include a couple of revolving credit cards (Visa, Sears, etc....) an installment payment (car payment, boat payment, etc.....) and a mortgage. But don't go out and buy house just to get a mortgage payment!

Inquires In A 6 Month Period - 10% Impact
A hard inquiry (which is having your credit report pulled by a creditor at your request) can cost you between 2 -25 points. You only have 10 inquires that count against you, but keep them down anyway. Your credit score gets nervous when you try to get more credit. And remember, you don't take such a hit when your credit report is pulled by mortgage or auto companies. You have a little window of opportunity while trying to get the best deal on a mortgage or a car.


Keeping balances low, on time payments and consistency. It's a simple as that. That's the plan for getting the highest scores possible. And it doesn't matter how much money you make. You can be a millionaire with lousy credit but someone making $15,000 can have credit scores over 750. Just follow the game plan.

You are allowed one free credit report a year. It's important that you check it even if you don't intend on buying anything. 25% of the credit reports have errors serious enough to result in denial of credit. 79% have some mistakes. This is information about you that is out there and you want to make sure it is correct.

You can go to www.annualcreditreport.com for your free credit report. If you would like a report reviewing all the information in this blog, just sending me a note with your email address at dan@glmf.com and I will get it to you right away.

Now check that credit report!


If you have any comments on this article, I would love to hear what you have to say!

Feel free to comment below.

Thanks for reading!

Dan Tenchall
Great Lakes Mortgage Funding

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dan@glmf.com