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REALTOR®: Your credit score is your risk factor

Wednesday, October 2, 2013

Eighty percent of consumers have errors in their credit report, Kevin Kust, a credit specialist with Continental Credit. Kust told REALTORS® at a Silicon Valley Association of REALTORS® meeting that if not corrected, some errors can remain in a report for 7 to 10 years and undermine their client's credit rating.

A bad credit report could jeopardize a buyer's chances of obtaining a home loan. Consumers need to periodically check their credit report to make sure it is accurate.

"Your credit score is your risk factor," said Kust.

FICO is the most widely known type of credit score used by many mortgage lenders in determining whether or not to extend credit to you, the interest rate and terms of the loan. FICO credit scores range between 300 and 850. Ratings are as follows: Excellent: 700-850; Good: 680 - 699; Okay: 620 to 679; Low: 580 to 619; and Bad: 500 – 579.

Your credit score is determined by the following factors. Kust explained how best to obtain a high score on each category.

Payment History (35%) - Maintain a positive history by paying your bills on time and correcting any inaccuracies in your credit report.

Amounts owed (30%) – Check your revolving credit, balance and limit ratios. Secure credit cards show a revolving debt and take the risk off banks. Pay off each card to a zero balance. Keep your cards active, but make sure the balance in each card is below 30 percent of your limit.

Most people think paying a collection will help their credit rating, but the action could actually damage their credit rating, said Kust. He recommends consulting an expert before making the payment.

Length of History (15%) - Maintain old accounts because they provide you with a credit history. Closing accounts can bring down your score. Use all your credit cards sparingly, so they remain active.

New Credit and Inquiries (10%) - Applying for a lot of credit before applying for a mortgage loan could indicate financial problems. Hard credit inquiries usually involve auto or mortgage loans and can affect your credit score for a period of time. FICO allows a 45-day "shopping window" with no adverse effect on your score. Inquiries after this period will take points off your score. Soft inquiries occur when companies check your credit history to verify your identity or when you check your own credit score. These types of inquiries do not affect your credit score.

Types of Credit Used (10%) – Your score is based on the mix of different types of credit and how many total accounts you have. Don't open new accounts just to increase the types of credit you have.

Kust said not every credit score online is a true FICO score. In fact, scores obtained from Internet companies are usually inflated compared to scores obtained by mortgage and other lenders. Also, your credit score can differ, since information is reported to the credit bureaus at different times. One agency's information may be more recent than that of another agency. Find out which day of the month your balance is reported and you pay it off before the reporting period, said Kust.


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

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