Follow Patrick Linkedin Facebook
Email Patrick Email
Financial
May 1, 2014

How To Get A Perfect Credit Score (Part 1 of 2)

Sponsored Content provided by Patrick Stoy - Mortgage Consultant/Owner, Market Consulting Mortgage

Being in the mortgage consulting and lending business, I am constantly reminded of the importance of credit scores and the enormous impact those little numbers can have on people’s lives. So this month, I want to offer a two-part series on credit scores. In this initial article we’ll just look at some basics, such as what a credit score is and how it’s calculated. Then I’ll follow up in part two by examining the importance of knowing and monitoring your credit score, including some actions (and non-actions) than can positively or negatively impact your individual credit score.

Part 1 – Understanding Credit Scores

First I need to apologize because the main title of this series, “How to Get a Perfect Credit Score,” was a bit of a trick to get your attention. I think there are many people interested in the secret to getting the perfect credit score – but the real secret is … nobody can get a perfect credit score. You will never get a perfect credit score because the credit bureaus that decide your score have intentionally made a perfect credit score unattainable. The bureaus are smart enough to know that if consumers figured out a bureau’s exact algorithm for calculating credit scores, many of those consumers would find clever and sneaky ways to manipulate the system and generate faulty credit scores that were not accurate indicators of true creditworthiness. Therefore, the bureaus are constantly changing their credit score algorithms to keep the rest of us honest. There are certain known actions that can help you earn a GREAT credit score, which we’ll review in part 2; but for now, just be aware that there’s no reason to get upset if you fall a little short of perfect, because you always will.

What is a credit score?

Your credit score is a numerical ranking that is calculated through an analysis of your credit history and current credit files. The score is an indicator of your ability and likelihood to pay loans, bills and debts on time, and is often referred to as “creditworthiness.” Each open credit account and owed debt is called a trade line. Whether you’re seeking a credit card, an auto loan, or a mortgage, lenders want to know how risky loaning money to you will be. Therefore, almost all lenders will order a credit report with your credit score before deciding whether or not to approve your loan or line of credit. You can think of your credit score as a numerical measure of how well you’ve managed money over a long period of time. But remember, your credit score is simply a snapshot at a given point in time and will change as your trade line activity changes.

Where do credit scores come from?

There are three credit bureaus that collect your credit history, and calculate and report your credit score. The oldest bureau, which is also the most prevalent in the southeastern U.S., is called Equifax, which currently assigns a credit score ranging from 334 – 818. Experian assigns a score of 320 – 844 and TransUnion uses a range of 309 – 839. 

When you borrow money, the lender will report your new trade line to one or more of the credit bureaus and provide your payment history on an ongoing basis. Your ability to properly manage your open trade lines is the basis of your credit history and subsequently, your credit score. For each trade line, the bureaus track several items, including:

  • Type of loan or debt (trade line)
  • Open date
  • Current balance
  • Minimum payment due
  • Payment history
  • Late payments and number of days late
While each bureau uses a different method for calculating your credit score, the most critical factors generally include the number of trade lines you have open, and your track record for paying them on time. We’ll delve into more specific ways your credit score can be impacted, and why that’s important, in part two of this series. But if there’s one thing to take away from this article, it’s that your credit score does matter – it affects the amount of money you can borrow (if any), the interest rate you’ll pay, and ultimately your overall financial well being.

Patrick Stoy has 15 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit www.macmtg.com. Patrick can be reached at [email protected] or 910-509-7105.

Other Posts from Patrick Stoy

Mcm 14jan insight
Ico insights

INSIGHTS

SPONSORS' CONTENT
Bovio ernie ceo 240207 head 712412398

Investing in the Health of Our Communities, for Today and the Future

Ernie Bovio - New Hanover Regional Medical Center Novant Health
Chris coudriet

A Look Ahead at New, Continued Initiatives for New Hanover County in The Next Year

Chris Coudriet - New Hanover County Government
Web awstaffpic2020 1 132245438

The 2024 Luncheon for Literacy featuring Special Guest Jason Mott

Alesha Edison Westbrook - Cape Fear Literacy Council

Trending News

OPINION: The Case Against A 135-foot Cape Fear Memorial Bridge

Isabelle Shepherd - Jul 15, 2024

Payne Named Director Of Development At Hill School

Staff Reports - Jul 16, 2024

College Road Shopping Center Sells For $8.5M

Cece Nunn - Jul 16, 2024

Jones Tapped As WARM NC's CEO

Staff Reports - Jul 16, 2024

Once Slated For Apartments, Site Off Market Street Could Get 60 Townhomes

Emma Dill - Jul 15, 2024

In The Current Issue

On BHI: Croquet, Anyone?

The Bald Head Island Croquet Club has produced its fair share of hard-hitting croquet crusaders, with past club members Bill and Billie Jean...


Apiture Measures Generational Tastes In Banking

A majority of the youngest American consumers – including 80% of Gen Z and 81% of millennials – report that digital banking is at the core o...


Doctor Building Trust At Jordan Clinic

At the corner of 15th and Greenfield streets, the first clinic opened its doors in April with Emilia Parrott as lead physician and Nicholas...

Book On Business

The 2024 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2024 Power Breakfast: The Next Season