Credit Scores — The Good, The Bad & The Ugly

Mark James
Sales Manager
NMLS 247356
Guild Mortgage Company
(808) 744-6420

There are many myths and urban legends surrounding credit scores and how they are calculated. Suffice to say the three major repositories (also known as credit bureaus) -Equifax, Trans Union, and Experian – have different algorithms or mathematical formulas for arriving at the score they provide on your credit report. It’s not simple, and each repository has it’s own formula.

Frequent Credit Score Questions

• Why is the credit score I get from my Loan Officer when he pulls my credit report different from what I can see for free on-line?
The simple answer is that, as always, you get what you pay for. Free credit reports don’t give you the same picture as a three-file-merged report from the afore-mentioned big three, who charge for their services. It’s also very hard to find out what methodology the free credit report uses to give you a credit score. Most mortgage lenders in Hawaii will order a credit report at no charge if you are working with a Realtor and legitimately getting pre-approved for a mortgage loan.

• Should I close down revolving accounts?

The customary recommendation is to wait until the loan is approved, then at that point the underwriter will advise you if the account needs to be paid off, or paid off and then closed. Don’t do anything that could change your credit history and possibly disturb your scores, up or down. There is no guarantee that your scores will go up.

• If a Credit Bureau makes a mistake on my account, can I get it re-scored?

Reviewing your credit report for possible mistakes and errors is always a good thing for the consumer to do. Re-scoring is best handled though the credit reporting agency your lender uses. I NEVER advise the consumer to go direct to Equifax, Experian, or Trans Union themselves. It can be very frustrating and time-consuming. Better to let your Loan Officer handle it, since her or his bank or mortgage company or credit union orders thousands of credit reports per year, and they have access to the bureaus that consumers do not have.

• What can I do to improve my scores?

The most important suggestion is NEVER MAKE A LATE PAYMENT ON ANY REPORTED CONSUMER DEBT OR CREDIT CARD. Late payments are credit score killers! The last 12 months history is most crucial. Mortgage payments are the worst debt to be late on. More than one time late in a 12 month period will ruin your chance to refi or buy again. If you have too many cards, close some of them. It’s better than forgetting and being late. If you do have late payments, be ready to explain them in detail, and if you can prove circumstances beyond your control (health, injury, loss of job, for example), all the better.

Your Loan Officer can recommend more sophisticated techniques for improving your scores, such as paying down certain credit cards so you don’t owe more than 50% of your available credit. Another technique is to add a family member to a positive credit account as an authorized user. This enables you to get a credit rating without applying for new credit.

There are many more ways to improve your credit. For more information call Guild Mortgage, Honolulu Branch at 744-6420, Waikele Branch at 369-7098, or our Main Office in Kailua at 263-4622.