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Your Credit Score and How it Works

Credit Scores have been around since the late 1950's. Scores are based on data derived from your credit history and payment patterns. This information is maintained on file with the three major credit repositories, Equifax, Experian, and TransUnion. Statistical models that measure hundreds of factors are assigned point values that indicate how likely you are to repay your debt. The resulting score is a "snapshot" that sums up your past payment performance and current credit usage. Because these scores are a composite of all your credit information, no single factor - like a bankruptcy or late payment - will be the sole cause of a low score.

When developing a credit score, the repository analyzes credit data on millions of consumers to determine patterns that forecast risk. Typically, scores range from 400 - 900, with a higher score indicating a greater likelihood of repayment. It is important to note scoring models do not consider race, gender, religion, marital status, income, nationality, address, employment status, position or title, length of time of the job, sexual preferences, or interest rates being charged on your accounts.

Scoring models do analyze all the information stored in the bureaus credit file such as:

35% of Score Weight is based on Past Performance. The fewer late payments, judgments etc., the higher your score. Recent late pays occurring within the past 24 months are more indicative of default. A 30-day late payment this month will have a greater impact on your score than a bankruptcy 5 years ago with clean credit since.

30% of Score Weight is based on Credit Utilization. Low balances on a number of accounts is better than high balances on a few. Balances higher than 30% of credit limit will have a significant impact on your score. Too many revolving accounts can be detrimental.

15% of ScoreWeight is based on Credit History and Age of Accounts listed. The longer accounts are open the better the score. Opening new accounts and closing older ones will negatively impact the credit score.

10% of ScoreWeight is based on Types of Credit - Finance Company accounts will score lower than bank loans or department store lines of credit.

10% of Score Weight is based on Credit Inquiries - Looking for new credit can mean a higher risk if, for example, several credit cards are applied for within a short period of time and other existing accounts are maxed out.

What can you do to improve your score? Unfortunately there is no magic formula fix-all. Your score will improve as your overall credit picture improves. But there are steps you can take to begin repairing your credit. You SHOULD pay down balances on revolving accounts to less than 30% of the available credit line. Close unnecessary or unused accounts; the availability of too much credit can negatively impact your score. Check your credit reports carefully. If there are errors, you must write the repository advising them of the misinformation. The Fair Credit Reporting Act gives the repository 5 days to notify the creditor of a dispute and request an investigation. Within 30 days, the creditor MUST report back to the repository regarding whether the disputed account entry should be modified, deleted, or remain. If there is no response from the creditor within 30 days, then the repository must remove the item from the credit file. If there is any change to your credit file, the repository must notify you within 5 days of any change.

With credit scoring playing such a huge part of mortgage lending decisions, it is not enough for a consumer to only shop for best rates and fees any more. A Loan Officer who has experience in dealing with the individual repositories can help resolve any credit problems that might exist, and may make the difference between getting an "A" quality interest rate and fees, and a "B/C" higher risk interest rate and fees.

By law, you are entitled to pull your credit report file from all three repositories free of charge once a year in order to make certain all is in order. Log on to to check your credit quickly, easily, and without cost. For a small fee you can also see your actual score.

If you have any questions regarding your credit, or to clean up items or mistakes on your credit report, call all three bureaus toll free:

  • Equifax: (800) 378-2732
  • Experian: (800) 422-4879
  • Trans Union: (800) 888-4213
Heather M. Neill, Broker ABR, CRS, ePRO, GREEN, GRI, LHC, MRP, REI (304) 612-3746
134 Powder House Road
Fairmont, West Virginia 26554


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