Where Do Credit Scores Come From?
By Michelle Black, HOPE (Home Ownership Program for Everyone)

Credit scores affect your life in many important ways.  First, anytime you apply for a mortgage, car loan, credit card, or financing of any kind your credit score will be looked at to determine whether you are approved or denied financing.  If you are approved, your credit scores are looked at again to determine what kind of interest rate you will receive.  Credit scores are the #1 factor considered when you apply for a loan.

Since credit scores are the first key to loan approval, let’s talk a little about where these credit scores come from and how they are calculated.  There are 3 major credit bureaus in the United States:  Equifax, Trans Union, and Experian.  Typically, each credit bureau will give you a different score.  The following chart shows the basic makeup of a credit score with any of the 3 major credit bureaus:

Payment History, an individual’s history of paying bills on time, accounts for 35% of your credit score. If a person has a high percentage of late payments on bills then his/her credit score will be lower.  It may sound crazy, but late payments can lower a person’s credit scores more than any other factor including bankruptcy, foreclosure, or repossession!  One late payment can actually drop someone’s credit score 30-100 points (especially if it is the first time a late payment is appearing on the credit report in a while).

Amounts Owed account for 30% of your credit score.  This factor can sometimes be a little confusing.  The credit bureaus will look at the amount of debt being carried by a person and compare it to that person’s available credit limit.  For example, if you have a credit card with a $500 limit and you owe $490 on the card then your credit score will be lowered.  However, keep that same credit card paid off and your credit score will receive a boost!  High credit card balances can significantly lower your credit score, even if you pay your monthly bill on time!

Length of Credit History makes up 15% of our credit score.  The credit bureaus look at the age of a person’s open credit lines to determine how many points will be awarded or taken away from the credit score for this category.  The older the accounts appearing on your credit report, the better.  Opening a new account can potentially lower your credit score even if you have never missed a payment on the account – so proceed with caution when applying for new credit.

New Credit makes up 10% of your credit score.  This refers to how often a person applies for new accounts.  Every time your credit report is pulled to apply for a loan your score is typically lowered 1-3 points and you do not regain those lost points for at least 90 days.  However, a “soft pull” of your credit report (that is an individual requesting a copy of his/her own personal credit report to review the file) does not hurt your credit score at all.  If you have not reviewed your credit report in a while, you are entitled to a free copy every year from www.annualcreditreport.com. Checking your report at least once a year for errors is highly recommended.

Types of Credit Used account for the final 10% of your credit score.  It is important to have the right balance of accounts on your credit report.  Too many accounts can hurt your credit scores, but so can too few accounts.  Also, loans with consumer finance companies (i.e. paycheck advance loans) will hurt your credit scores just by opening the account and should be avoided.

Have specific questions about your credit report? Our caring credit specialists are here to help. Please contact us via email or call 704-499-9696. We would love to hear from you!

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Every year at tax refund time we have many clients wisely choose to  invest part of their tax refund check towards achieving a healthy credit report. Wouldn’t you love for 2012 to be the year when you finally reach the higher credit scores you desire? Wouldn’t it be wonderful if 2012 was the year when you were finally able to stop those pesky collection calls and possibly even become a homeowner?

HOPE would love the opportunity to help you reach your goals! You can join the ranks of the 85+ HOPE graduates who have completed the program with credit scores healthy enough to purchase a home in just the last 4 months! Call or email us today to schedule your own personal, no obligation credit analysis with one of our credit experts to see if the HOPE Program is right for you. We can’t wait to hear from you soon!

Why Are Credit Scores Important?
By Michelle Black

So, you likely already know the basic principle about what a credit score is used for and, therefore, why it is important to have a good one.  Whenever you apply for a loan (car loan, mortgage loan, credit card loan, personal loan, etc.) a lender is going to look at your credit score and decide whether or not you qualify.  If your credit score is high enough, you can likely expect to be approved for the loan (provided you earn enough income to qualify). However, a low credit score could result in you being declined for the loan you want or, if you are approved, it could mean a higher interest rate and a bigger down payment.

To put it simply, credit scores (and your credit report) are a type of report card which future lenders get to look at when you apply for a loan.  The “report card” shows lenders a picture of how you pay your bills – on time, late, or not at all.  If your credit report shows that you have a history of paying your bills on time then future lenders will want to loan you money as well since, chances are, you will pay the payments on time and they will be able to earn a profit from you in the form of interest.  However, if your credit report shows that you have a history of paying your bills late or not at all then future lenders will be scared to loan you any more money.  The reason they will be hesitant to loan you more money is because chances are higher that they may not get paid back for their investment, much less make any kind of profit through interest fees.

In our current culture, credit scores impact our lives in many ways.  I already mentioned how you will need a good credit score to qualify for any type of loan.  However, did you also know that your credit score may be used to determine you auto insurance rate and whether or not you have to put down a deposit when opening a new utility or cell phone account?  Plus, it is now a common practice for employers to pull your credit score when you are applying for a new job.  Depending upon the industry in which you work, your current employer may even access your credit report to determine whether or not you are “credit worthy” to remain employed with the company.

Since credit affects so many different aspects of our lives, it is more important than ever to have a healthy credit score.  However, if you find yourself in the uncomfortable situation of having a subprime credit score (a consumer score of 649 or lower) then HOPE would like to encourage you to give our credit experts a call.  Remember, you do not have to feel embarrassed or defeated due to a subprime credit score!  Bad credit scores happen to good people all the time. In fact, over 60 million American currently have a subprime credit score so, if you are in the same boat, you certainly are not alone! You still deserve to be treated with dignity and respect. Don’t ever let anyone make you feel otherwise.

You can make a plan today to start improving your credit scores.  Please contact us via email or phone at 704-499-9696 to learn more about how the HOPE Program can help you to achieve the healthier credit you desire!  Over 85 graduates have completed our program in the last 4 and ½ months with credit scores healthy enough to purchase a home! We would love the opportunity to help you achieve your success story as well.

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Does your job offer credit education classes?  If not, then ask your boss to feature a HOPE Credit Expert at your next staff meeting! These free classes can be tailored to fit into any schedule.  Our experts can give a quick, 5 minute “credit tip” or even an in depth 1 hour training session on how to achieve healthier credit.

HOPE would love to help you give a little something back to your hardworking employees. Please contact us today for more information or to schedule a free credit education class for your company.  Just don’t wait too long – our calendar fills up fast!

Don’t forget: HOPE Credit Experts are available for your next church seminar or school event as well! Clean credit and the peace of mind that comes along with it is a priceless gift! Why not share it with your employees, friends, and family? We hope to hear from you soon!

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Congratulations are in order for a recent graduate of the HOPE Program. We are pleased to report that Ms. Jordan of North Carolina has experienced tremendous improvement in her credit scores since joining the HOPE Program in January.  Here are just a few of the wonderful changes that have taken place for her so far:

Her middle credit score has increased a total of 146 points!
Her credit scores have jumped from the 400s into the 600s!
Her credit scores are high enough to qualify for a mortgage!
13 negative accounts totaling nearly $5,500 have been erased from her credit report!

We are very happy to see these great results for Ms. Jordan and cannot wait to see her become a home owner as well!  Remember, at HOPE our goal is not just to help our members achieve healthier credit, but to teach our members how to maintain healthy credit for a lifetime.  If you or a loved one is facing credit problems of your own we encourage you to give us a call today at 704-499-9696.  Our caring staff is standing by to answer your questions and to show you how the HOPE Program can assist on your journey towards a healthier credit report.

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