Credit Score

What is a credit score?

A credit score is a numerical value that determines how likely you are to pay back a debt in the form of a loan. A scoring algorithm uses information from your credit report to create a credit score. A mathematical formula is used to scientifically get this number. Some of the elements that make up this score include:
– Your unpaid debt
– Number of applications for credit.
– How long you have had your loan accounts open.
– The amount and type of loan accounts you have.
– Whether you have had a debt sent to collection, a foreclosure, bankruptcy and the time frame that it happened.
– The amount of available credit that you are using.

Businesses use credit scores to make determinations as to who they offer mortgages to. These can also help in determining your interest rate that you get on a credit card, and limit. There is no “one” credit score. Many different types of scores can be generated based on the data it was given and how it was calculated. A higher credit score can aid greatly in qualifying for a loan with a good interest rate. Generally credit scores fluctuate between 300-850.

What is a Good Credit Score?

A credit score is weighted on a scale from 300 to 850. Credit scores are calculated with information that is in your credit report. One of the metrics that is used to determine this score is your payment history. Another major factor, the amount of debt you have and the length of your credit history. There are many different types of scoring models, different types pull from certain data points to achieve the end result.

As mentioned, your score range will vary depending on which scoring model your number is being pulled from. Scores ranging from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 is considered a great score. Anything above 799 is the absolute best.

A credit score of 670 is generally considers you a “subprime borrower,” meaning they may consider you a bit more difficult to qualify you for the best loan terms. If you are lower than this, you will fall under the “poor” credit range and may find it difficult qualifying for the loan terms you desire.

Different lenders have their own specific criteria when it comes to granting credit, this can be factors such as income and others. Because of this, the end score they accept can vary depending on that criteria.

There are 3 main credit bureaus in which scores are pulled from (Equifax, Experian, and TransUnion). Credit scores in Denver Colorado are also based from these bureaus as well as anywhere else in the state. Not every creditor will use the reports from all three, some lenders had their own criteria when it comes to allowing credit. The different scoring models that are available may differ depending on the loan and lenders’ preference for certain criteria.

These are some tried and true behaviors to practice to establish and maintain responsible healthy credit score.

– Keep your credit card balance below the limit. If your balance is higher than your limit, this can affect your score.
– Apply for credit sparingly. Don’t open many accounts all at once in a short period. This can affect your credit score.
– Pay off your debts. Pay your debt down, the sooner the better.
– Pay your bills on time, every time. This goes for all of your bills, not just credit cards. The different bureaus we discussed may report things such as cell phone bills as well. Although, this would not be weighted heavily on your credit report. If you’re having trouble paying a bill, don’t skip payments. Contact your lender immediately, they can help get you on a payment plan that will keep you from taking a hit on your credit from a non or missed payment.
– Check your reports regularly. Make sure you check your report from time to time. Checking things like personal information on your account for accuracy can help keep things up to date. You’re allowed a free copy of your report every 12 months from all three nationwide credit bureaus. Keeping tabs of your report can help you maintain and hit your goals for future lending opportunities.

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