Below I have spelled out some info that will help you out when you look at your credit scores and what affects them and what you can do to help your credit scores in order to prepare for a mortgage loan approval when it comes to your credit scores.
- Opting out will help a credit score.
No it won’t. The bureaus don’t know if someone has opted out or not and it’s not factored into the credit scores. If someone’s score improves after they have opted out it’s because something else has changed on the report but not because they opted out.
- Paying off old delinquencies will remove them from your credit report.
No a collection account or an account with late payments will stay on a credit report for 7 years. That being said, the credit bureaus will occasionally go in and remove old collections that have not reported for a while. But that’s at their discretion. Just because you paid if off doesn’t mean it will be removed. Also paying off an older collection with then brings the reporting date current which could actually hurt the credit scores.
- All rate shopping inquiries are the same.
If you are rate shopping for a mortgage or auto, all inquiries with Trans Union and Equifax have a 45 day window. For Experian however it’s only 15 days. For revolving inquiries there is no “shopping” period. All those inquiries are counted no matter what the time frame is.
- Opening new accounts will help your credit score.
This will help only if the borrower has no established credit yet. Once you have several accounts, opening new ones will actually have a negative affect on a credit score until substantial history is accumulated on the account.
- Paying off all your revolving balances is a good thing!
Actually no it’s not. The credit bureaus models like to see at least one revolving balance, even if it’s small. Having no revolving balances can actually have a negative impact on a credit score. So always keeping one account with a small balance is a very good idea.
- Your credit is affected by how much money you have in your savings or checking accounts.
Neither of these are factored into a credit score.
- Closing old accounts will help a credit score.
The credit scoring models like to see several open accounts that have zero balances and are not used often. When an account is closed you lose that history. If it’s an account you’ve had for a long time and has no late payments, closing it can actual hurt the credit score. Having several open accounts, even if they are not used much, makes it look like a person has good financial responsibility.
- When I check my own credit score it’s the same one used by lenders.
Unfortunately no it’s not. A person actually has 69+ different credit scores. The ones that lenders use are completely different than what a borrower sees when they get their own scores. Those are personal scores and are not used by any industry for any reason.
- Checking my own credit report will hurt my score.
When a consumer checks their own credit report it’s a “soft” inquiry and will not impact the scores. Only “hard” inquiries done by creditors when a consumer applies for a loan or credit card will possibly have a negative affect on a credit score.
It’s possible to avoid paying for your credit score or at least an estimate. Here is a list of all of the well-known ways to get a FICO score or score estimate for free:
Free FICO credit scores:
- Discover Free Credit Scorecard (Experian, FICO-08)
- freecreditscore.com (Experian, FICO-08) — you do not need to give your credit card number
For free estimates of your credit score estimates and credit monitoring:
- Credit Karma (TransUnion, Equifax)
- Credit.com (Experian)
- Mint (Equifax)
- Chase Credit Journey (TransUnion)
Also see the Wikipedia page on free credit report websites.
Credit cards (no annual fee) that offer a free FICO score with their monthly statement or online:
- Amazon Synchrony Store Card (TransUnion, FICO-08)
- American Express (Experian, FICO-08)
- Bank of America Cards (TransUnion, FICO-08)
- Barclaycards including the Sallie Mae Mastercard (TransUnion, FICO)
- Branded Citibank cards (Equifax, FICO-08)
- Chase Slate (Experian, FICO)
- Discover cards (Transunion, FICO-08)
- FNBO Cards (Experian, FICO-08 Bankcard)
- Walmart Store Card (TransUnion, FICO)
- Wells Fargo Cards (FICO)
Deposit accounts that offer a free FICO score with their monthly statement:
- Digital Credit Union (EQ-05: Mortgage Score)
Credit cards (no annual fee) that offer a free estimated credit score online:
- Capital One credit cards (TransUnion, VantageScore 3.0)
Note that score ranges vary between FICO scores and other scores:
- FICO: 300 to 850 (used in 85-90% of credit decisions)
- VantageScore (used in 10-15% of credit decisions)
- VantageScore pre-3.0: 501 to 990
- VantageScore 3.0: 300 to 850
- TransUnion New Account Score: 300 to 850 (score estimate)
- Equifax: 280 to 850 (score estimate)
- Experian: 330 to 830 (score estimate)
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant Equal Opportunity Lender. NMLS#57916http://www.nmlsconsumeraccess.org/
— Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.