General – Today, credit scores are more important than ever. Yet, many, many owners of distressed properties are at a loss to know what will happen to their credit score if they complete a loan modification, short sale, a deed-in-lieu-of-foreclosure (“DIL”), or are foreclosed. This is an unanswerable question, because everyone’s credit history is directly a function of their own specific circumstances. There are no cookie-cutter answers. In the final analysis, a credit score is a number that calculates the level of risk a lender or creditor will be accepting if they make you a loan, sell you a car, or do any number of things that would result in an extension of credit. And many businesses such as phone and insurance companies rely upon your credit score in deciding whether, and upon what terms, they will provide their services or products to you. In short, the better your score, the better the rate, terms, and pricing of the product or service you are seeking.
Credit Scoring – Here are some of the factors that go into determining your credit score:
- The number and type of credit accounts you have;
- How timely you pay your bills;
- The existence of any prior collection action taken against you;
- Your outstanding debt;
- The age of your accounts (that is, the number of days from date of invoice to date of payment – 30, 60 90 days, etc.)
This type of information is put into a statistical program and your information is compared to that of other consumers with similar profiles.
Credit Reports. According to the Federal Trade Commission (“FTC”), you have a right to a free copy of your credit report from each of the three national consumer reporting companies once every 12 months. Under the Fair Credit Reporting Act (FCRA) you also have a right to obtain your credit score from the national consumer reporting companies. They are permitted to charge a “reasonable fee,” which is generally around $8.00.
Seeing your credit report and your credit score is essential, since it is the first step you must take if you are to improve it.
HyperLynx: For more information on improving your credit, go the FTC Website.
HyperLynx: To order your free annual report visit AnnualCreditReport.com.