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Credit Score Guide

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Brian Daniel

You sit down to look at your credit report for the first time. If you're scores are above 720, congratulations! You have excellent credit; stop worrying. If you're scores are not above 700, no problem--let's get to work. Take solace in the fact that the national average score is around 676 according to the Gallup Organization. If you're scores are below 400, 500, or 600, there's definitely room for improvement and only one way to go--up!

If the numbers I've mentioned don't make any sense to you or you have no idea what they mean, don't fret--I'll explain. Credit scores range from 350 to 850. All three of the credit bureaus--Equifax, Experian, and Transunion--offer FICO credit scores using a complex mathematical formula developed by Fair, Isaac and Company, but they each give the scores a different name: At Equifax, the FICO is known as the Beacon credit score; at TransUnion, it's called Empirica; and at Experian, it's called the Experian/Fair, Isaac Risk Model.

If you're credit scores are above 720 you have excellent credit and will able to get the best interest rates available. As your credit scores drop, the interest rate you'll receive for a home loan will rise: this is known as tiered pricing. The more of a risk the lender takes on you, the higher your interest rate will be. In addition, all lenders have their own break points between tiers. What this means is that one lender may raise the interest rate if a score drops below 700, while another lender won't give a higher rate until the score drops below 690. In summation, you should do everything in your power to maintain good credit scores, and be sure to shop around and do your homework when looking for a home loan because all lenders are not created equal. I think you've already gleaned the moral of the article but just in case you haven't, here it is: Good credit scores save lots and lots of money, and be sure to choose a lender wisely to get the best rate for your scores.

Brian Daniel is a loan officer/marketing coordinator for Bend Mortgage Group Ltd.
a provider of home loans and mortgages for the state of Oregon. For more useful tips and articles, visit www.bendmortgagegroup.com