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
Headshot2

Small Colleges Focus on Accessible Course Formats for Adult Students

Dani Somers - North Carolina Wesleyan
Burrus rob headshot 300x300

The Rise of Artificial Intelligence: What Does It Mean for Our Region?

Robert Burrus - Cameron School of Business - UNC-Wilmington
Jeff metrocopy

Public Adjusters are Your Advocates After the Storm

Jeffrey Feldstein - Metro Public Adjustment

Trending News

Porters Neck Rezoning Request To Bring Lots For Sale

Johanna Cano - Apr 18, 2019

Harvesting Seafood Innovation

David Dean - Apr 19, 2019

Building Up Health Care Innovation

Johanna Cano - Apr 19, 2019

Reports: Rents Rising Higher In Wilmington Than In Other NC Cities

Cece Nunn - Apr 19, 2019

In $15.7M Deal, Alcami Sells Wilmington Technology Center, Leases It Back

Cece Nunn - Apr 18, 2019

In The Current Issue

Hamilton Looks To Redefine The Entrepreneur

Entrepreneurship isn't limited to a select few, says Brian Hamilton, co-founder and CEO of Sageworks, who has been spreading that message i...


Harvesting Seafood Innovation

Can Wilmington become the home of seafood innovation in the United States? A two-day workshop April 23-24 at the University of North Carolin...


Building Up Health Care Innovation

When New Hanover Regional Medical Center launched its Innovation Center last year, it sought to foster and test creative ideas for improving...

Book On Business

The 2019 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2019 WilmingtonBiz Expo Keynote Lunch - CEO, nCino, Pierre Naude`
Transporting the Future - Power Breakfast 3.12.2019
Health Care Heroes 2018