1453 New Haven Road (Rt. 63), Naugatuck, CT 06770        Phone: (203) 729-9050       info@egfllc.com

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Text Box: What is a Credit Score? A credit score is a number given to you that is a snapshot of your credit risk at a particular point in time.  A credit score is a number, from 350 to 900, that helps lenders decide whether the borrower is likely to pay back their loans on time. The lower the number, the more at risk you are of defaulting on a payment. Although there are programs out there for virtually everyone, the higher your score is, the easier it may be to obtain a loan. Your credit score influences the credit and the terms that are available to you when applying for a loan. Therefore, usually, the higher the credit score is, the more likely it is that you'll be able to get a better interest rate or even higher loan amount. If your credit score is on the lower end of the spectrum, there are still loan programs out there that will suite your particular needs and interests. Many lenders look at assets, reserves, real estate and the like when approving your loan, not only credit scores. * The most widely used credit score is the Fair Issac and Company (FICO) credit score. FICO scores are provided to lenders by the three major credit reporting agencies: Equifax, TransUnion, and Experian. How is a Credit Score determined? There are several factors that determine your credit score. These include, but are not limited to; types of credit in use, new credit, length of credit history, amounts owed, amount of money available and payment history. Credit reports take the combination of all these factors into consideration, not just one or two. Your FICO score also looks at both the negative and positive aspects of your credit history when determining your scores. In the eyes of creditors, the higher your credit score is, the lower the risk of you missing any payments. Your FICO score only looks at information in your credit report. The advantage of the credit score is that it does not take into consideration personal information such as race, religion, orientation, marital status, or sex. These scores are entirely based on objective financial information. Ways to improve your Credit Score If you have a high credit score, you have an advantage in the rates and programs available to you when applying for a mortgage. If your credit score is lower than you would like it to be, there are always ways of improving your score. Although this cannot happen overnight, there are several steps you can take to gradually increase your score over time. * It is best to check your credit scores 6-12 months before you apply for a big loan, in the event you need to improve your scores. If you are actively working to improve your score, you may want to check it quarterly or monthly to review any new changes. ~Pay your bills on time: If you have balances on credit cards, installment loans (i.e. car loans), finance company accounts or mortgages, make sure to pay them on time. Late payments can be counted against your score, and can significantly lower it. If you pay bills on time, this shows creditors that you can manage your accounts and make payments in the future. If you have been late on payments in the past, the longer your statements reflect current payments, the better your score will be. ~Be careful of outstanding balances: If you owe a significant amount of money on various accounts this could indicate you cannot handle the cash you're spending, and could count against you on your credit score. Having small amount of money on credit cards does not qualify you as being a high risk borrower, unless those amounts are high. Keeping a low balance (about 50% or less of the credit limit, within reason of the credit limit) on credit cards will show lenders that you are not charging more than you can pay off on your credit cards. ~Pay down your debt: Paying the whole balance of a credit card or a revolving account is a good sign you can manage your payments. Also, paying down installment loans to lower the original balance is another good indicator that you are in control of your finances. ~Be wary of Quick-Fix answers to low credit scores: Be sure not to close unused credit cards that are in good standing as a short term solution to raise credit scores. This may backfire and affect your score negatively. It is also important not to open new credit lines for the purpose of increasing your available credit because it could affect your score aversely. Your FICO score takes into consideration how many accounts you have open, and how long they have been open. Accounts that have been open longer and have a good payment history are important to having good FICO scores. ~Build your Credit history: It is best to have credit records that are well established over a period of time. If you have only been managing credit recently, be sure not to open several accounts rapidly. Because creditors look at the average age of all accounts, doing so will lower that average and could also look risky if you are a new credit borrower. ~Too many inquiries can hurt your Credit: When you are looking to take out a loan, different lenders and mortgage brokers are likely to "pull your credit", increasing the number of requests shown on your credit report. If you have few accounts or a short credit history, this could affect your credit score causing it to drop. Although inquiries remain on your credit report for two years, FICO scores look at inquiries within the last 12 months, and count those which truly impact credit risk. It is important to note, however, not all inquiries on your credit will impact your credit score negatively. ~Keep in mind: Public records and collection accounts will show up on your credit report after they are paid off. Bankruptcies, foreclosures, suits, wage attachments, liens and judgments will show up on your credit report and are considered very serious. However, old items with smaller amounts will not hurt you as much as recent or large amounts will.  

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1453 New Haven Road (Rt. 63), Naugatuck, CT 06770        Phone: (203) 729-9050       info@egfllc.com