NJ First-Time Home Buyers


Credit Scoring - What Makes Up My Credit Score? (1 of 6)

I've worked with clients all across the board.  Some who had "perfect" credit, and some who upon seeing their credit report, found themselves a second job (fixing their credit).  I'll help you understand what makes up a great credit score, and how to alter any situation to improve the credit scores.credit pie chart

Let's lay some ground-work. 

Three bureaus evaluate your credit scores

  1. Equifax
  2. Trans Union
  3. Experian

Credit scores will be different among the three bureaus because not all creditors report your data to all three bureaus.  Even if your data was reported exactly the same to each, the three credit bureaus don't use the same model to evaluate your score.  Typically your three scores range within 50-60 points from high to low.  On some occasions you will see a score drastically higher or lower than the other two.  For this reason, many creditors will pull all three scores and use your middle score for qualifying purposes. The middle score is assumed throughout these articles when we talk about one's credit score

Credit scores range from 350 - 850.  The higher the score the better.  What is a great credit score?  In today's market you want to have a 720 or better.  Even higher is better for qualifying purposes, although it probably won't get you a better rate.

"Good" Credit Scores.  You can still finance a home with a lower score, but it becomes more expensive either by way of a higher interest rate, or by way of higher fees (usually points*).  Stepping down from that 720 score, you will experience what is call Risked Base Pricing.  Each 20 points lower could cost you in rate or fees. Today Fannie Mae, Freddie Mac, and FHA all have some form of risked base pricing.  So literally one point in your credit score could be a huge savings to you.

credit pic"Poor" or Low Credit Scores.  Your options shrink real fast as you dip below 580.  Although many mortgage guidelines allow for scores below 580, many lenders/investors (as of this writing, 10/22/08) incorporate their own guidelines on top of these main guidelines. So in some instances, going to another lender that offers the same type of loan, for instance an FHA loan, may allow you to finance your purchase or refinance instead of being denied.

Now that we have a basic knowledge of credit scoring, look out for the next part of this series, Credit Scoring - Payment History (2 of 6) where we will start to talk about the reasons scores are what they are, and how to get your credit score higher and keep it there.

For questions or a personal credit review, contact Steve Kappre at  856.419.3561 or at www.stevekappre.com

* A point is equal to 1% of the loan amount. i.e. One point on a $100,000 loan is $1,000. 

Credit Scoring – What Makes Up My Credit Score? (1 of 6)

Credit Scoring – Payment History (2 of 6)

Credit Scoring – Balances (3 of 6)

Credit Scoring – History (4 of 6)


Comment balloon 6 commentsStephen Kappre • October 22 2008 07:23PM


Great explanation Steve.  Can't wait for the rest of "the story".  Thanks.

Posted by Paddy (Patricia) Pizappi, Real Estate Associate Broker Hudson Valley NY (Better Homes and Gardens Rand Realty) almost 11 years ago

I found part 2 of 6 so informative that I had to come over here and read part 1 of 6. Looking for ward to the remaining parts.

Posted by Russel Ray, San Diego Business & Marketing Consultant & Photographer (Russel Ray) almost 11 years ago

Russel - that makes me very happy to hear. Part 3 should be coming fairly soon. As always, just shoot me an email or post if you have any questions. 

Posted by Stephen Kappre, Helping You Home (KW Hometown) almost 11 years ago

Steve, great work on this.  I use to run the consumer FICO business at Fair Isaac so I appreciate it when someone is doing a great job of educating.  BTW, I have a credit education site called VideoCreditScore.com where I have over 80 video posts on various credit score related topics.  All activerain users can take my videos and embed them into posts quite easily.

For your balances post check out these tips:

Tips for Full Balance Payers

Can I Setup AutoPay for Credit Cards?

Are credit limits being lowered?



Posted by AndyJ almost 11 years ago

Thanks for the indepth look at what is really behind the "score"  am going to read the other posts right now.

Posted by Marie Ogle, Contract Mortgage Processor (Mortgage Processing Solutions) over 10 years ago

Marie - I'm glad you enjoyed - just email, text, or call me if you have any questions that are unanswered :)

Posted by Stephen Kappre, Helping You Home (KW Hometown) over 10 years ago

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