What’s in a point? In credit scores, big bucks

By | Feb 22, 2013

What’s in a point? In credit scores, big bucks
News from Walla Walla Union-Bulletin:

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A 619, 639, 659, 679, 699, 719 or 739 credit score …

… Can cost you thousands. A 620, 640, 660, 680, 700, 720 or 740 credit score can therefore potentially save you thousands.

One of the primary factors in how lenders assess risk is by your credit score. The credit scoring system is a mathematical formula that will be a major factor in the interest rate you obtain for your mortgage loan, and how much your loan will cost. If your credit score is 740 or better, you will not have to pay any premium for obtaining any type of mortgage loan. However, every 20 points can have an impact, and being off by just one point can have major consequences.

The difference between a 679 credit score and a 680 credit score doesn’t sound like much, but it can literally be the difference in having a fee assessed of hundreds, if not thousands, of dollars at a particular interest rate.

For example, in this situation, FHA lenders assess a one-half percent fee on your loan amount. If you are borrowing $ 200,000 for your home loan, one-half percent equals $ 1,000, for just one measly point on your credit score.

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Related News:

Paying off loans may not improve credit scores
News from MSN Money:

This post comes from Deanna Templeton at partner site Credit.com.

With credit playing such a huge factor in your financial future, it’s no wonder we look for ways to maximize our credit scores. One common strategy for building your credit scores is to pay off credit card debt. It can give your credit scores a nice boost, especially if you’re carrying a large balance.

It may seem logical, then, to assume that the same strategy must apply to other types of accounts — like a car or home loan, for example. And if you follow this theory, paying a loan off early might sound like a great strategy for building your credit scores.

Unfortunately, you may be making yourself less creditworthy, according to scoring models.

When it comes to credit scores, there’s a big difference between revolving accounts (credit cards) and installment loan accounts (i.e., mortgage, student loan). Paying an installment loan off early won’t earn you any additional credit score points, and keeping them open for the life of the loan…………… continues on MSN Money

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