Mortgage Tools

Loan Programs

The mortgage world can be very overwhelming with all of the programs and options available. Your Loan Officer will work with you to determine which loan product benefits you. You will review your current financial situation, future goals and also consider factors like the length of time you plan on living in the home and comfortable monthly payments.

Fixed Rate Mortgages

What types of fixed rate loans do you offer?

  • Conventional, conforming 30, 20, 15, and 10 year fixed rate mortgages.
  • 30 and 15 year fixed rate jumbo mortgage programs for loan amounts exceeding areas’ conforming loan limits.
  • 30 and 15 year FHA mortgages. Popular low money down financing programs
  • 30 year fixed rate USDA rural housing loans. Solution for lower income borrowers looking to purchase or refinance homes in rural communities.
  • 30 and 15 year VA loans. Option for eligible active duty military personnel and veterans.

Who Should Consider a Fixed Rate Mortgage?

  • People who plan on being in their homes for more than 7-10 years.
  • Borrowers who like the security of knowing what their monthly principal and interest debt obligations are every month.
  • Home buyers and homeowners with little equity in their homes. If property values were to fall, borrowers with an adjustable rate mortgages may find themselves in positions where they cannot qualify for a refinance.
  • Consumers who do not feel secure in their positions of employment. If borrowers lose their jobs they may not be able to refinance to a fixed rate product when their ARMs begin to adjust.

What Types of Properties Are Eligible?

  • Most types of residential 1-4 unit properties. Certain restriction may apply.
  • We have fixed rate products for primary residences, second homes, and investment properties.

Which Loan Terms Should I Consider?

  • 30 year fixed rate mortgages – Easily the most popular option in today’s marketplace. Payments are spread out over 30-year terms which helps keep payments low. On the downside, the amount of interest paid over the life of the loans will be greater when compared to other shorter term financing solutions.
  • 20 year fixed rate mortgages – Popular options for borrowers who do not want to commit to the higher payments associated with 15-year mortgages but do not want to stretch their loans out to 30 years.
  • 15 year fixed rate mortgages – Second most popular fixed rate alternative. Interest rates are typically considerably lower than 30-year pricing and borrowers can save thousands of dollars in interest when weighed against 30-year loans. Due to the shorter term, monthly payments are also higher.
  • 10 year fixed rate mortgages – Shortest fixed rate loan products we offer. Good option for borrowers who are looking for the security of a fixed rate product and who want to pay off their loans as quickly as possible.

Adjustable Rate Mortgage (ARM)

Adjustable Rate Mortgages (ARM)s are loans whose interest rate can vary during the loan’s term. These loans usually have a fixed interest rate for an initial period of time and then can adjust based on current market conditions. The initial rate on an ARM is lower than on a fixed rate mortgage which allows you to afford and hence purchase a more expensive home. Adjustable rate mortgages are usually amortized over a period of 30 years with the initial rate being fixed for anywhere from 1 month to 10 years. All ARM loans have a “margin” plus an “index.” Margins on loans range from 1.75% to 3.5% depending on the index and the amount financed in relation to the property value. The index is the financial instrument that the ARM loan is tied to such as: 1-Year Treasury Security, LIBOR (London Interbank Offered Rate), Prime, 6-Month Certificate of Deposit (CD) and the 11th District Cost of Funds (COFI).

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When the time comes for the ARM to adjust, the margin will be added to the index and typically rounded to the nearest 1/8 of one percent to arrive at the new interest rate. That rate will then be fixed for the next adjustment period. This adjustment can occur every year, but there are factors limiting how much the rates can adjust. These factors are called “caps”. Suppose you had a “3/1 ARM” with an initial cap of 2%, a lifetime cap of 6%, and initial interest rate of 6.25%. The highest rate you could have in the fourth year would be 8.25%, and the highest rate you could have during the life of the loan would be 12.25%.

Some ARM loans have a conversion feature that would allow you to convert the loan from an adjustable rate to a fixed rate. There is a minimal charge to convert; however, the conversion rate is usually slightly higher than the market rate that the lender could provide you at that time by refinancing.

FHA Loans

FHA home loans are mortgage loans that are insured against default by the Federal Housing Administration (FHA).  FHA loans are available for single family and multifamily homes. These home loans allow banks to continuously issue loans without much risk or capital requirements. The FHA doesn’t issue loans or set interest rates, it just guarantees against default.

​FHA loans allow individuals who may not qualify for a conventional mortgage obtain a loan, especially first time home buyers. These loans offer low minimum down payments, reasonable credit expectations, and flexible income requirements.

JUMBO Loans

Jumbo loans are for borrowers looking to purchase and refinance residential properties throughout much of the United States. We’re a multi-state mortgage lender whose roots date back to the 1940’s. We’ve helped thousands of home buyers and homeowners find the right jumbo loans at some of the most competitive mortgage rates in the industry.

Our non-conforming jumbo mortgages can be used to finance most types of primary residences, second homes, and 1-4 unit investment properties. Contact us today for details on our various home loan products.

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What types of Jumbo Loans do you offer?

  • 30 & 15 Year Fixed Rate Jumbo Loans
    • May be good options for borrowers looking for the security of  fixed rate products.
  • Adjustable Rate Jumbo Loans
    • Offer a low introductory rate for a set number of years.  This may make them appealing to borrowers seeking to keep their payments as low as possible in the short term. After the introductory rate periods end, rates begin to adjust up or down based upon the loans’ caps, margins, and the indexes that the loans are tied to.

How can you determine the conforming loan limits for your area?

  • You can visit Fannie Mae’s website here. Under the Resources’ Heading, click on the Loan Limit Look-up Table. The table allows you to check the limits by County. Loan limits are higher in high cost areas.
  • Be sure to note that loan limits change by the number of units. The general limit for a 1-unit home in most areas is $453,100. Limits change periodically. Please contact us for the most -up-to-date figures.

What types of properties do we finance?

  • Most types of residential 1-4 unit properties.
  • We have jumbo loan products for primary residences, second homes, and investment properties.
VA Home Loans

The VA Loan provides veterans with a federally guaranteed home loan which requires no down payment. This program was designed to provide housing and assistance for veterans and their families.

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The Veterans Administration provides insurance to lenders in the case that you default on a loan. Because the mortgage is guaranteed, lenders will offer a lower interest rate and terms than a conventional home loan. VA home loans are available in all 50 states. A VA loan may also have reduced closing costs and no prepayment penalties.

Additionally, there are services that may be offered to veterans in danger of defaulting on their loans. VA home loans are available to military personal that have either served 181 days during peacetime, 90 days during war, or a spouse of serviceman either killed or missing in action.

The Loan Process

Where should you start?

It is hard to know where to begin! There are so many options that it can be very confusing to find the right type of loan. You must first ask yourself many questions?

Some of these are:

  • How much can I afford to pay each month?
  • Do I plan on keeping this house for only a few years or for a long period of time?
  • Is a small payment a higher priority than paying the loan down quickly?
  • Am I able to make a down payment?
  • Over how many years do I want to pay a mortgage?
  • Am I trying to purchase or refinance an existing mortgage?
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The answer to these questions will help you know which loan will be best for you. There are a wide variety of loan options, so it will be useful to know some of the basic tendencies. In general:

  • The larger the down payment, the better your options are for payment size, interest rate, and length of time to pay back the loan.
  • A fixed-interest rate will tend to be higher than an adjustable rate.
  • The longer the term of payback, the smaller the payment.
  • The smaller your payment, the larger the amount that is going to interest.
  • The more that you pay to interest, the slower that you are building equity.

It is also useful to understand the essential differences in types of loans. There are really only two basic types of loans:

  • Fixed Interest Mortgages (FRM)
  • Adjustable Rate Mortgages (ARM)

Loans are also classified as either government loans or conventional loans.

Conventional loans are further broken down into either conforming or non-conforming loans. To qualify as a conforming loan (or an A paper loan), it must fall under the guidelines established by Fannie Mae and Freddie Mac, corporations that have established industry standards and guidelines that govern credit requirements, down payment amounts and maximum loan amounts.

Once you have these general types down, you will still have to look at the individual features of specific loan types to determine which one will best meet your needs.

Your loan options can be limited by poor credit. A credit score is a system of points earned based on your credit history. This three-digit number (raging from 300 to 900) is influenced by such factors, among others, as:

  • late payments
  • debt to income
  • total debt amount
  • age of accounts (the older the better)

There are three major credit bureaus (Experian, Equifax and TansUnion) that produce comparable credit scores using some version of FICO, the industry standard developed originally by Fair Isaac and Company. Because this credit score is used by most lenders to determine your qualifications for a loan, you may want to see what you can do to increase your credit score before you apply for a mortgage.

So, the bottom line: Start with your credit score; end with the specific loan type that is most appropriate to your needs.

Loan Checklist

Essential Documents:

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  • Previous two pay-stubs
  • Previous two years’ W-2 forms
  • Previous two years’ tax returns
  • 2-3 months of bank statements
  • Purchase contract (if applicable)
  • Home address for last two years
  • Address of bank branch
  • Social Security Card (of each purchaser)


Circumstantial Documents:

  • Evidence of other income (child support, etc.)
  • Divorce settlement papers
  • Balance sheets (if self employed)
  • Other consumer debts (student loans, credit debt, etc.)
  • Gift letters (parents covering down payments, etc.)
Closing Costs

At the loan closing, you will be required to pay your down payment and other various closing costs and fees. Most of the closing fees are paid by the buyer, but some of the fees are prorated, by date, to the seller and the buyer. In order to be prepared to pay the closing costs, you may request a Fee Worksheet from the lender. However, the estimate often differs from the actual closing costs, so it is important to understand what to expect.

​Before you make long term decisions about the terms of your mortgage, such as locking in an interest rate, you should review the Fee Worksheet to determine if there are hidden costs that may change your decision.

At times, fees such as the application fee, credit report fee, or the appraisal fee may be required with the loan application before the closing. Certain fees vary from lender to lender, but generally, taxes, appraisals, credit reports and title insurance should be comparable for all borrowers. Sometimes, your fees may be included in the mortgage amount, depending on the terms negotiated. But generally, the buyer comes prepared to pay the related fees at the time of the loan closing. Common closing costs and fees that you may expect are:

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Loan Origination Fee: a percentage of the mortgage (generally 1%), charged to set up and evaluate the loan application.

Application Fee: required by the lender to process your loan application, often required with the application, generally non-refundable.

Credit Report Fee: requested by the lender in order to evaluate your loan application (generally obtained from one of three major credit reporting agencies: Equifax, Experian, TransUnion).

Appraisal Fee: used to obtain an independent appraisal of the home to be mortgaged; the appraisal is a factor in determining the amount the lender will loan.

Survey Fee: may be required – verifies the legal position of the home on the property and ensures that there has been no encroachment on the property.

Title Search Fee: charged for a detailed search of the historical records related to a property to ensure that the seller is legal owner, that there are no liens, restrictive covenants, outstanding judgments or other claims against the property (A certificate of title issued as a result of a title search does not necessarily protect against hidden defects which did not show up in the search – often the lender will require title insurance for protection against such claims).

Title Insurance: often required by the lender for protection against hidden title defects; a lender’s policy only protects the lender – a buyer may also opt to purchase an owner’s title insurance policy.

Recording or Transfer Fees: a small fee charged to cover the paperwork to record the home purchase and transfer ownership.

Interim Interest: interest from the closing date to the end of the month generally charged to the buyer
Property Taxes: buyer’s prorated portion of state and local government property taxes already paid by the seller (such as annually paid taxes).

Escrow Account Payments: (often required by the lender) charges to cover costs or payments which will be due after the closing; escrow accounts are often set up to continue for the life of the loan, where a specified portion of the mortgage payment goes into escrow to cover certain on-going property related expenses and payments such as taxes and insurance.

Home Appraisal

What is the purpose of a home appraisal?

A home appraisal is generally required by the lender in order to establish that the value of the home will be sufficient collateral for the amount of the loan. The appraisal fee is generally paid by the buyer, typically  required at the time of the loan application.

​A home appraisal is done by an independent appraiser who will generally visit your home and inspect the interior and exterior. However, the appraiser is not performing the same service as a home inspection. Generally, the cleanliness of the interior will not add to or diminish the appraisal value. The appraiser considers many other factors, beyond the inspection, to establish the fair market value, such as comparable values, historic sales and market demand for that area.

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Market values fluctuate over time and also vary from neighborhood to neighborhood, causing appraisals to become outdated. Lenders will require a new appraisal if any refinancing is done, and tax assessors generally re-assess property annually. The value established by your bank loan appraisal will not change the assessment set for property taxes as county tax assessors do their own property evaluations.

​In either case, the home buyer should monitor the appraisals for fair treatment in relation to similar houses in the surrounding area and in view of the standards set for appraisers by state licensing boards. For tax purposes, there is often a protest deadline. In the case of a loan, the buyer should be comfortable with the appraisal before committing to a firm offer and before the loan closes. Any concerns or complaints should be brought to the attention of the lender or the state regulatory board. Although the appraisal primarily protects the lender, it can also benefit the buyer or home owner by:

  • Providing assurances that the home is not over-valued
  • Justifying the amount of the loan
  • Qualifying you for certain terms
  • Evaluating equity to remove Private Mortgage Insurance (PMI)
  • Protecting against negative home equity
  • Aiding tax and estate planning
  • Helping determine insurance valuations
  • Determining the feasibility of home improvements, refinancing or additional financing
Home Inspection

When should I have a professional home inspection done?

An independent professional home inspection, done at the right time, could save you thousands of dollars. The results may influence your purchase price, the terms of or contingencies to the purchase agreement and the type of insurance coverage you decide is needed. Knowing the condition of the house before the settlement date may save you costly repairs later on. A formal offer should include an inspection contingency. Hire your own inspector to ensure that your interests are being protected.

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When you find the home you want to purchase, a home inspection will provide you with critical information about the condition of the house. Negotiating needed improvements can only happen if the buyer is aware of them. While an appraisal may set the value of the home, the inspection verifies the specific details of the condition of the house such as:

• The cleaning or repairs needed
• The structural aspects of the house (such as the foundation, framing, roof)
• The internal systems (such as plumbing and electrical)
• Other representations made by the seller

​Knowing the actuality of the condition of the house will allow you to include contingencies that the seller must meet before you become liable. A professional home inspector will know what to look for – what kinds of factors are important to evaluate before entering into a final purchase commitment.

Prior to the loan closing , a final inspection should be done to ascertain that the conditions of the agreement have been met. Once you have signed, your options will be limited.

Mortgage Glossary

Adjustable Rate Mortgage (ARM): A mortgage having an interest rate which is usually initially lower than that of a mortgage with a fixed rate but is adjusted periodically according to the cost of funds to the lender. 

Appraisal: A professional opinion of the market value of a property. 

Amortization: The act of paying off (as a mortgage) gradually, usually by periodic payments of principal and interest or by payments to a sinking fund 

Annual Percentage Rate (APR): The annual equivalent of a rate of interest when the rate is quoted more frequently than annually, usually monthly. APR allows homebuyers to compare different mortgages based on the annual cost for each loan. Not all lenders calculate APR the same way. 

Buydown: A lump sum payment made to the creditor by the borrower or by a third party to reduce the amount of some or all of the consumer’s periodic payments, to repay the indebtedness. In the context of project financing, refers to a one-time payment out of liquidated damages to reflect cash flow losses from sustained underperformance. 

Construction Loan: A short-term loan to finance the building phase of a real-estate project. 

Discount Point: One percentage point of the principal of a mortgage loan that some lenders require borrowers to pay immediately as a condition of making the loan. That is, if the lender makes a mortgage loan, it may require the borrower to pay a certain amount of discount points up front. The amount paid is deducted from the interest the borrower would otherwise owe on the loan. Discount points are tax deductible for the borrower because they qualify as prepaid interest. 

Down Payment: The portion of the purchase price which the buyer pays in cash; is not financed with a mortgage. 

Down Payment Assistance Program (DPA): Funds given to buyers to assist with the purchase of a home. Buyers do not have to repay these funds. 

Earnest Money or Escrow Deposit: The holdings of documents and money by a neutral third party prior to closing. 

FHA Loan: A loan insured by the Federal Housing Administration open to all qualified home purchasers. There are limits to the size of FHA loans, but they are usually generous enough to handle moderately-priced homes. 

First Time Homebuyer Program: Mortgage loans with special qualifying terms for those who have never owned real estate or have not in the past few years. Although the programs and terms vary by state, they often offer down payment and closing cost assistance. 

Fixed-Rate Mortgage: A mortgage in which the interest rate does not change during the loan term. 

Index: The benchmark interest rate an adjustable-rate mortgage’s fully indexed interest rate is based on. 

Interest Rate Lock: Represents rate you selected and will be the interest rate used to factor your monthly payment. The lock-in secures the interest rate during the process of your loan approval as long as your loan is processed and closed by the rate expiration date.

Lien: A legal claim against a property that must be paid when the property is sold. 

Lock-in: A written agreement guaranteeing the homebuyer a specified interest rate provided the loan is closed within a set period of time. 

Margin: The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate. 

Mortgage Insurance: Money paid to insure the mortgage when the down payment is less than 20%. 

Preapproval: The lender has verified a borrower’s credit, bank references and employment, and approved a target mortgage loan amount and sales price prior to the borrower buying a home. Subject to other conditions (i.e., property appraisal) and is not binding on the lender. 

Prequalification: The process of determining how much money a prospective homebuyer will be eligible to borrow before a loan is applied for. 

PITI: Acronym for total monthly housing expense: principal, interest, taxes, and insurance. 

Title Insurance: Title insurance protects a real estate owner or lender against any loss or damage they might experience because of liens, encumbrances, or defects in the title to the property, or the incorrectness of the related search. 

Underwriting: The process of evaluating a loan application to determine the risk involved for the lender. 

USDA Rural Home Loan: A USDA Guaranteed Loan is government-insured 100% purchase loan. These loans are only offered in rural areas and serviced by direct lenders that meet federal guidelines. 

VA Loans: Fixed-rate loans guaranteed by the U.S. Department of Veterans Affairs. They are designed to make housing affordable for eligible U.S. veterans.

Insurance

Mortgage Insurance

Mortgage Insurance (MI) is required if you plan to make a downpayment of less than 20% of the purchase price of the home. It is a type of financial guaranty that helps protect your Lender from losses, should you be unable to make mortgage payments and default on your loan.

Private Mortgage Insurance

Privately-owned companies provide private mortgage insurance (PMI). These companies provide guidelines to Lenders that detail the types of loans they will insure and determine borrower eligibility.

Homeowners Insurance

Homeowners insurance, also known as hazard insurance, is a policy that covers damages to your home, your belongings and accidents as outlined in your policy.

Is Homeowners Insurance Required at Closing?

Yes. Proof of homeowners insurance will be required before you can close your home.

Refinancing

Refinancing your mortgage could potentially be beneficial for your financial circumstances if you are interested in paying off high-interest-rate debt, shortening the length of your repayment term for your mortgage or reducing your monthly mortgage payment.

Determining whether to refinance your mortgage depends on your individual financial situation. It can make sense to refinance if mortgage rates are decreasing, your home has appreciated in value or if you have been making consistent, on-time payments on your original 30-year mortgage for less than ten years.

There is an application fee to begin the refinancing process. In addition to an application fee, you will generally need to pay the same expenses that were incurred with your original mortgage.

Refinancing typically takes between two and four weeks. The length of time can depend on a number of factors like the appraisal and neighborhood comparables.

In addition to adjusting your monthly mortgage payments, there are a variety of loan options that allow you to tap into your home’s equity. This would allow you to take cash out of your house by refinancing. Your Lender can help determine a solution for you.

Credit

Your credit payment history is recorded in a file or report, and this is your credit report. These files or reports are maintained and sold by “consumer reporting agencies” (CRAs). One type of CRA is commonly known as a credit bureau. You have a credit record on file at a credit bureau if you have ever applied for a credit or charge account, a personal loan, insurance, or a job. Your credit record contains information about your income, debts, and credit payment history. It also indicates whether you have been sued, arrested, or have filed for bankruptcy.

Do I have a right to know what’s in my report?

Credit Report

Yes, if you ask for it. The CRA must tell you everything in your report, including medical information, and in most cases, the sources of the information. The CRA also must give you a list of everyone who has requested your report within the past year-two years for employment related requests.

​What type of information do credit bureaus collect and sell?

Credit bureaus collect and sell four basic types of information:

Identification and employment information: Your name, birth date, Social Security number, employer, and spouse’s name are routinely noted. The CRA also may provide information about your employment history, home ownership, income, and previous address, if a creditor requests this type of information.

Payment history: Your accounts with different creditors are listed, showing how much credit has been extended and whether you’ve paid on time. Related events, such as referral of an overdue account to a collection agency, may also be noted.

Inquiries: CRAs must maintain a record of all creditors who have asked for your credit history within the past year, and a record of those persons or businesses requesting your credit history for employment purposes for the past two years.

Public record information: Events that are a matter of public record, such as bankruptcies, foreclosures, or tax liens, may appear in your report.

What is credit scoring?

Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points — a credit score — helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.

The most widely use credit scores are FICO scores, which were developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).

Because your credit report is an important part of many credit scoring systems, it is very important to make sure it’s accurate before you submit a credit application. To get copies of your report, contact the three major credit reporting agencies:

Equifax: (800) 685-1111
Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800
These agencies may charge you up to $9.00 for your credit report.

​You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. This free credit report may not contain your credit score and can be requested through the following website: https://www.annualcreditreport.com

Why is credit scoring used?

Credit scoring is based on real data and statistics, so it usually is more reliable than subjective or judgmental methods. It treats all applicants objectively. Judgmental methods typically rely on criteria that are not systematically tested and can vary when applied by different individuals.

How is a credit scoring model developed?

To develop a model, a creditor selects a random sample of its customers, or a sample of similar customers if their sample is not large enough, and analyzes it statistically to identify characteristics that relate to creditworthiness. Then, each of these factors is assigned a weight based on how strong a predictor it is of who would be a good credit risk. Each creditor may use its own credit scoring model, different scoring models for different types of credit, or a generic model developed by a credit scoring company.

Under the Equal Credit Opportunity Act, a credit scoring system may not use certain characteristics like — race, sex, marital status, national origin, or religion — as factors. However, creditors are allowed to use age in properly designed scoring systems. But any scoring system that includes age must give equal treatment to elderly applicants.

How reliable is the credit scoring system?

Credit scoring systems enable creditors to evaluate millions of applicants consistently and impartially on many different characteristics. But to be statistically valid, credit scoring systems must be based on a big enough sample. Remember that these systems generally vary from creditor to creditor

Although you may think such a system is arbitrary or impersonal, it can help make decisions faster, more accurately, and more impartially than individuals when it is properly designed. And many creditors design their systems so that in marginal cases, applicants whose scores are not high enough to pass easily or are low enough to fail absolutely are referred to a credit manager who decides whether the company or lender will extend credit. This may allow for discussion and negotiation between the credit manager and the consumer.

What can I do to improve my score?

Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change — but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.

Nevertheless, scoring models generally evaluate the following types of information in your credit report:

  • Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.
  • What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.
  • How long is your credit history? Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.
  • Have you applied for new credit recently? Many scoring models consider whether you have applied for credit recently by looking at “inquiries” on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make “prescreened” credit offers are not counted.
  • How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.

Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.

To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It’s likely to take some time to improve your score significantly.

What happens if you are denied credit or don’t get the terms you want?

If you’ve been denied credit, or didn’t get the rate or credit terms you want, ask the creditor if a credit scoring system was used. If so, ask what characteristics or factors were used in that system, and the best ways to improve your application. If you get credit, ask the creditor whether you are getting the best rate and terms available and, if not, why. If you are not offered the best rate available because of inaccuracies in your credit report, be sure to dispute the inaccurate information.

​If you are denied credit, the Equal Credit Opportunity Act requires that the creditor give you a notice that tells you the specific reasons your application was rejected or the fact that you have the right to learn the reasons if you ask within 60 days. Indefinite and vague reasons for denial are illegal, so ask the creditor to be specific. Acceptable reasons include: “Your income was low” or “You haven’t been employed long enough.” Unacceptable reasons include: “You didn’t meet our minimum standards” or “You didn’t receive enough points on our credit scoring system.”

If a creditor says you were denied credit because you are too near your credit limits on your charge cards or you have too many credit card accounts, you may want to reapply after paying down your balances or closing some accounts. Credit scoring systems consider updated information and change over time.

Sometimes you can be denied credit because of information from a credit report. If so, the Fair Credit Reporting Act requires the creditor to give you the name, address and phone number of the credit reporting agency that supplied the information. You should contact that agency to find out what your report said. This information is free if you request it within 60 days of being turned down for credit. The credit reporting agency can tell you what’s in your report, but only the creditor can tell you why your application was denied.

Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) is designed to help ensure that CRAs furnish correct and complete information to businesses to use when evaluating your application.

Your rights under the Fair Credit Reporting Act:

  • You have the right to receive a copy of your credit report. The copy of your report must contain all of the information in your file at the time of your request.
  • You have the right to know the name of anyone who received your credit report in the last year for most purposes or in the last two years for employment purposes.
  • Any company that denies your application must supply the name and address of the CRA they contacted, provided the denial was based on information given by the CRA.
  • You have the right to a free copy of your credit report when your application is denied because of information supplied by the CRA. Your request must be made within 60 days of receiving your denial notice.
  • If you contest the completeness or accuracy of information in your report, you should file a dispute with the CRA and with the company that furnished the information to the CRA. Both the CRA and the furnisher of information are legally obligated to reinvestigate your dispute.
  • You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction.