What Everybody Ought to Know About Missing a Payment

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All credit scores are not equal

Let’s face it, the way houses are selling faster than Fidget Spinners you can’t afford to let your credit score drop for any reason. Doing so could cost you not only precious time that must now be used to correct or improve your score, but means that you’ll most likely lose out on property you hoped to purchase.

Additionally, you want to be certain that you’re keeping track of the correct type of score. The Consumer Financial Protection Bureau recently cracked down on TransUnion and Equifax who, using proprietary scoring models, deceived consumers regarding the cost of credit scores and their actual usefulness. (The CFPB ordered TransUnion and Equifax to pay over 20 million in fines and restitutions.)

The Gold Standard of accurate scoring

Fair Isaac Corporation model, FICO, is used most often used by lenders. While you can get free scores online, watch for wording like “educational” or “estimated” which may indicate that these scores may not be actual, or usable when buying a home. Using a model other than FICO, could have you scrambling for ways to boost your score without much time to accomplish the feat. See our link below to some clever ways you might gain your score for next to nothing.

Checking your credit report doesn’t damage your credit rating. A “soft pull” for a look-see barely gets notice compared to a “hard pull” which is when you apply for a credit card, car loan or home loan. Additionally, the soft pull will vanish quickly from your report. Should you find yourself among those with higher scores, it can’t be overstated how important it is to protect it. Credit scores affect insurance rates, where you live, your line of credit and even the job you get.

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Having an excellent score does not exempt you from penalties if you fail to make timely payments. In face, the opposite is true in most cases. The moment a financial difficulty arises, seek out creditors for amenable solutions rather than let it be reported to the credit bureau. Here’s a sample of what could potentially happen:

Current score and points lost for 30 day delinquency

• 681-700 — 70-90 points
• 701-720– 90-110 points
• 721 and above– 110-130 points

This scoring system penalizes all payments over 30 days late (and more so 60 and 90 days delinquent) to prevent re-occurrence. Not only do those delinquencies negatively impact higher scorers, there’s the added sting of slow recovery, is made difficult by design. Someone with a 760 has more credit available to them, bigger house, bigger car, student loans, more credit cards and signature loans. And when they are delinquent lenders want it to hurt.

Current score and recovery time
• 680-700 — six months to recover score
• 700-720 — a year and a half
• 720 and up — three years.

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Frequency, Severity and Recency

Your FICO score uses three additional criteria to evaluate your score.  What that means is that a new late payment can hurt your score more than one from over two years ago. If you trend toward chronically late on payments that negatively impacts as much as the amount that’s past due.

If you’re planning to buy a home this year, it’s worth the cost to get an accurate score.  If you don’t have the score you thought you had, or have items on your report that need to be addressed, take care of it as soon as possible. Stay on track with your payments.

Be informed about credit repair resources and score generation. Learn more about credit scores and what changes are on the horizon.

If you have questions, please call our office 96140 891-9000 for straight talk about your credit score or visit our website at OhioCapitalMortgage.com.

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