UNDERSTAND HOW YOUR SCORE WORKS Probably, one of the reasons why you have a low credit score is because you do not understand how your credit score works. While it is true that there are various credit scores, the FICO score is the ma jor one, used by over 90 percent of the top lenders when making lending decisions. The FICO score is usually calculated using both the positive and negative information that is reported on your credit report. Basically, the data that is computed to give you a credit score is broken down into five main categories; • • • • •
Payment history-35 percent. The amounts owed-30 percent. Your credit history (length)- 15 percent. New credits-10 percent. Types of credit used- 10 percent.
You have to, however, understand that each lender has their own established criteria with regards to the underwriting of new loans and how they manage their existing loan portfolio. Your credit score is an isolated factor among several that the lenders will consider before giving your loan. 3. IF YOU NOTICE ANY ISSUE FIX THEM You now understand how the credit scores are calculated and how they work; it is time to focus on fixing the minor issues and items that are bringing your score down. To help you with this, go through each of the three reports lines by line. In this process, you have to verify that all the information in the report is, in fact, correct, highlight all the negatives and or the incorrect information. These are your areas of improvement. Additionally, it is not uncommon to find that your report has some credit errors. In fact, according to government data, more than 1 in 5 Americans have errors in their reports. These errors can hugely impact your ability to qualify for a mortgage, which will hurt your rate too. However, there is a recourse; once you note some inconsistencies, you are entitled to a dispute on the credit report. 4. BECOME AN AUTHORIZED USER If you have a relative who has a relatively good credit score, consider asking them to add you as an authorized user on one of their accounts. While the cardholder might still withhold you from using the card, or even giving you the account number, you can still benefit from it.
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An authorized user can build credit; however, it can be good or bad; this is usually dependent upon the primary account holder and how they manage their balances and bill payments. As such, be an authorized user on an account that is owned by a person you trust, a person who is responsible. 5. DO NOT OPEN NEW ACCOUNTS You must know that every time you chose to open a new credit line, the lender pulls your credit report as part of the application process; this is a process called a hard inquiry. In the short term, it will harm your credit score as it is placed on your report even if you are not approved. Some types of loans, mainly the instalment contracts, will at first bring the credit score down for the first few months before eventually helping you build up your credit. Additionally, the lender will use the DTI, and a new large monthly payment will possibly change these ratios, placing you into a category where you can no longer qualify for a loan. As such, you should wait until and after you have completed your home purchase before you make any big financial commitments. Do you wish to buy a home in Richmond, or even get a more in-depth analysis of how credit scores work, talk to Andre Jackson. Bishop Andre W. Jackson is a native of Richmond, California where he still resides and for over 21 years has owned Jackson Medical Supplies and Equipment. He owns a record label, Ground Up Record & Production Co., and is the Vice-President of BASA Publishing and The American Clergy Leadership Conference of Northern California and National Co-Chair. Bishop graduated from Sacramento Theological Seminary with a master’s degree in Christian Counseling and Theology and a doctorate degree in Christian Education and Theology. To learn more about Andre, follow this link https://thepowerisnow.com/andre-jackson/ Sources; https://www.homelight.com/blog/how-to-improvecredit-to-buy-home/ https://themortgagereports.com/37200/preparingto-buy-a-home-how-to-raise-credit-score-fast https://www.redfin.com/blog/how-to-increase-yourcredit-score-quickly/
THE POWER IS NOW MAGAZINE | JULY 2020
