What is Credit?
As a whole, credit is borrowed money. This money is used to purchase goods and services and paid back to the entity that the money was borrowed from, plus any finance charge.
There are four types of credit:
- Installment Credit: The lender loans you a certain amount of money and you are required to pay them the money borrowed plus interest in installments. Mortgages are a prime example of installment credit.
- Revolving Credit: The borrower is given a maximum credit limit that they are able to make charges up to. Each month they carry a balance and make a payment. Most credit cards are examples of revolving credit.
- Charge Cards: Charge cards are a specific type of credit in which the balance must be paid in full monthly.
- Service Credit: These are agreements with service providers. You pay them a monthly fee and they grant you a service. Cell phone service, Netflix™, and gym memberships are examples of service credit.
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Where do I get credit?
Credit is obtained through opening and maintaining credit bearing accounts, such as credit cards, car loans, mortgages, student loans. To build credit, one should make on time, monthly payments to their accounts.
What is a FICO Score?
Your FICO score is a number that ranges from 300 to 850. It is used to determine your credit risks and is derived from the information on your credit report. Higher scores and indicative of lower credit risks, generally leading to better loan terms.
How does my credit impact my rate?
Your credit score is indicative of the risks of lending money to you. Generally, the higher your credit score, the less risk there is in lending money. The lower the score the more risks. If you have a higher credit score, your interest rate, or the cost of financing, will be lower. If you have a lower score, your rate will be higher.
What if my credit is bad?
First, don’t stress. Bad credit is not a permanent thing. Our mortgage bankers have tools to helping you repair your credit. We are able to extend loan offers to people with scores as low as 620. Keep in mind, the lower your score the higher the rate. If you would rather wait until your score is higher and able to qualify for more competitive rates, let us help.
How to check my credit?
If you have a credit card, you card may include free credit reporting. There are also numerous resources on the web for checking and keeping track of your credit.
For the most accurate results, get a copy of your credit report from the three nationwide credit reporting companies.
Once every 12 months, you are entitled to a free copy of your credit report from TransUnion, Equifax and Experian. To obtain your report go to annualcreditreport.com
Will my credit score be impacted if I check it?
When you or an employer checks your credit score, your credit score is not impacted.
Note: Every time your credit report is pulled an inquiry is added to your report. The only the inquiry has an impact on your credit score is when the inquiry is pulled by a credit card company or a lender.
What’s in my credit report?
Your credit report is the window to your credit and financial history. It contains an array of information and insight such as:
Personal Information: Full name and variants, presents and past addresses, date of birth, social security number, and employer information
Credit Accounts: Revolving credit and installment accounts, account status, contact information, credit limits or loan amount and whether or not it is an individual or joint account
Payment Information: Monthly payment amount and status on all reported accounts
Public Records: civil judgements, tax liens, bankruptcies
Debts: Debts that are owed on all accounts- mortgages, auto loans, credit cards, student loans, etc.
Hard Inquiries: This is applied to your credit report each time you apply for credit.
Negative Information: Repossessions or voluntary surrenders, charge offs, late payments, collections and other derogatory items
It is important to check your credit report on a regular basis to ensure that all information is accurate.
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