Credit includes all the elements that affect your mortgage rate, and lender credibility of being able to repay your debts. This includes everything reported by credit repositories that lenders and creditors refer to, such as: Your Credit Score and Your Overall Credit Report. From this, lenders determine your Consumer Credit Worthiness. Also for your knowledge, included - How inquiries affect your credit score, What and how B/C - Credit is determined, and the Loan Approval Process:

• Credit Score
• Credit Report
• Consumer Credit Worthiness
• How inquiries affect your credit score
• B/C - Credit
• Loan Approval Process
  

FICOŽ Scores

In the 1980s, Fair, Isaac and Company devised a mathematical model to predict the credit risk of consumers based on information in their credit report.  Today, the Fair, Isaac system -- known as FICOŽ -- is the scoring model most widely used by lenders.  Fair Isaac only gives us pieces of the their scoring model (only about 300 points or so) as follows:  

Credit Report

A document completed by a credit-reporting agency that compiles information about a consumers credit history and current credit status,  that discloses this information (credit cards, previous mortgage history, bank loans, and public records dealing with financial matters). 

Many different formulas are used to calculate credit scores.  As mentioned above, we only have a piece (we also know that persons age 50 and above receive extra points (how many points per age; we don't know). 

There are other credit reporting agencies available that report other items such as: Utilities, Telephone and Communications, and other personal credit histories that don't appear in the 3 main Bureaus below.

Credit Repositories / Credit Bureaus / Reporting Agencies

Consumer Credit Worthiness - Negative Items

ˇ        Payment history - A record of late payments on current and past credit accounts may lower the score.

ˇ        Public records - Matters of public record (bankruptcies, judgments, and collections items lower the score).

ˇ        New accounts - Opening multiple new accounts in a short period of time will lower score.

ˇ        Accounts in use - The presence of too many open accounts can lower the score.

ˇ        Amount owed - 50% or more of balance lowers the score, especially when approaching the credit limit.

ˇ        Inquiries - Whenever a third party orders a full credit report (lender, landlord, or insurer), an inquiry is recorded on the credit report.  A large number of recent inquiries will lower the score.

ˇ        Consumer Credit Counseling Services - Non-profit organizations established to help debtors make payment arrangements with creditors is treated by lenders as a bankruptcy.  (good for credit report, not lenders)

Consumer Credit Worthiness - Positive Items

ˇ        3 or 4 revolving credit cards - with high lines of credit ($10,000+), carrying very low balances < 1/2 limit

ˇ        At least one charge card - (American Express, Diners Club, VISA, etc.)

ˇ        At least one Department Store Card - (Sears, JC Penney, Office Depot, etc.)

ˇ        All tradelines at least 6 months old - and at least one that's more than 3 years old (bank & student loans)

ˇ        At least one "installment" tradeline in good standing - (mortgage, auto loan, or student loan)

ˇ        No derogatory notations - No late payments, all accounts reported as "Paid As Agreed"

ˇ        Very few inquiries -- no more than 1to3 credit report inquiries in a six month period.

ˇ        Length of credit history - In general, a longer credit history is better.

   How inquiries affect your credit score

 Inquiries occur whenever your credit report is pulled.  Each pull/inquiry is recorded on your credit report.

According to Fair Isaac, all three CRAs are now using the same program to calculate inquiries.

There are two kinds of inquiries:

• Soft Inquiries occur when you pull your credit report or when one of your existing creditors pulls your credit report.  Creditors pull your credit when they are checking to see how you are doing credit-wise (looking for potential problems) i.e. just before offering you a limit increase.
  

Soft inquiries supposedly have no effect on your credit score.

• Hard inquiries occur when your credit report is pulled as a result of your applying for new credit.  These count against you.
  
  

When shopping for a mortgage, remember that MTG Brokers Corp. does the comparisons for you, and pulls your credit ONCE - Only Once!

Note:  Fair Isaac changed their inquiries scoring method for those who are auto and mortgage shopping, realizing that numerous inquiries will be made by each car dealer, banker, mortgage broker etc.. before the consumer can make a logical decision on which product he/she will take a loan out on. 

Here are the exceptions made for auto loans and mortgage inquiries:

• An inquiry buffer is in place and all Auto and Mortgage inquiries within 30 days from Scoring are ignored.
• Auto and Mortgage inquiries in any 14 day period count as one inquiry  (this is called de-duplication)

We don't know how many inquiries are too many, although lenders will require a letter of explanation for all inquires made within 30 days of loan origination (maybe more), and often re-pull your credit prior to setting closing.

Go to this link to get an idea of how they score you..very interesting...don't be afraid to play with the numbers!  http://www.myfico.com/ScoreEstimator/MyFicoScoreEstimator.html

       B/C - Credit - an overview

B,C and D Credit Ratings - Risk Grades
Typically, B/C lending refers to imperfe