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Upbeat Times 17th


Annual Spring Guide 2016


April Showers and Credit Ratings!


by Barry O'Meara • barryo@stearns.com


SANTA ROSA, CA. ~ April showers bring May flowers, but my smart phone brings me “flash flood


alerts”. March


filled our drought stricken reser-


voirs and saturat-


ed our


parched landscape. Te politi- cal race continued to entertain us. We all now know Donald Trump has no problems “down there”


regardless


how small his hands


might be. Te candi- dates have lashed out with


every bit of “fact” they know, only to be “fact checked”, and have set in motion waves of en- tertainment, rippling through the media. Faster than Wi-Fi! More


powerful than a “Super Pac”! Our credit scores leap into our lives and cast hurdles in our paths.


Each month, our


personal information is, com- piled, digitalized and trans- formed into a three digit num- ber.


Tis number is called


our “FICO Score”, and weighs heavily on our ability to ob- tain the lowest interest rate, land the best employment, or even rent that perfect house. Passed by Congress in 1971, the Fair Credit Reporting Act (FCRA) and all of its amend- ments, have been instrumental in protecting us from abuses of the Credit Reporting Agencies (CRA). Tese agencies consist of three bureaus: Equifax, Ex- perian, and Transunion. Te information the CRA compiles uses the Fair Isaac Corpora-


of owed; length of history; new credit;


types of credit. Sixty-five per- cent of the scoring is weighed on payment history and how much we owe.


So, with that


knowledge, it makes sense that if you pay your bills on time and don’t max out your credit limits, your scores should be pretty high. Te rule of thumb is to keep your credit card bal- ance to 1/3 of your limit, never be late on a payment, and only apply for credit if you need it.


If you follow these simple


rules, you should be able to keep your credit score above 700.


When lenders price-out a


loan for a home mortgage, they use a “risk base pricing” model to determine your final interest rate. Tis matrix is re- ferred to as a Loan-Level-Pric- ing-Adjustment (LLPA). Te matrix is set up with columns and rows broken into credit score ranges. Te other col- umns are broken into loan-to- value ranges. As you may have guessed, the lower the credit scores and the higher the loan- to-value range is, puts you at the highest pricing adjust-


... continued on page 23 “In three words I can sum up everything I’ve learned about life: it goes on.” ~ Robert Frost UPBEAT TIMES, INC. • April 2016 • 17


tion (FICO) scoring model. Tese bureaus then generate a number between 300 and 850. Tis number will be used to predict whether or not you’re a good credit risk. What is your FICO? Tis


is a moving number. However, with caution we try to keep our scores high. Having your cred- it checked too oſten, or carry- ing too much debt, all affects your final score. Te model developed by Fair Isaac breaks the scoring into five categories: payment history; amount


UPBEAT TIMES, INC. • April 2016 • 17


THE MORTGAGE COACH


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