April 2008 Vol. 3 No.4
• Changes in Credit Score Calculations - Know Your Score! • April's Home Value Improver • About Us

Changes in Credit Score Calculations - Know Your Score!

In the world of borrowing, you are your credit score. With the availability of credit scores on the Internet and more people being aware of identity theft, the once mysterious credit score has become more consumer friendly. Keeping up to date on any changes to credit score policy is vitally important. This spring Fair Isaac Corporation, the company that determines your credit score, is revamping its scoring model. The hope is that the new scoring model will do a better job in predicting borrowers' default rate. So what, you may say. Well, it's important for you to know these details.

First, let's define a credit score:

  • A highly specialized risk assessment based on the information supplied solely within a single credit repository (Experian, Transunion, Equifax).
  • A "snapshot" of a consumer's credit profile at the particular point in time that the credit report is obtained from a repository.
  • A summation of risk of repayment of debt by a consumer based on the repository's credit profile as ranked against all other consumers with credit.

Credit bureau scores range from approximately 300 - 850 points -- the higher the score, the lower the risk of default. A credit score is calculated by the repository's software and is based solely on the good and bad data within the consumer's credit file.

The score is made up of 40 different variables to determine the risk. It takes into consideration:

  • the level of credit debt and payment histories
  • length of credit histories
  • number of recent credit openings and inquiries
  • type of credit used
It does NOT take into account:
  • occupation
  • income
  • length at current address
  • race
  • color
  • national origin
  • marital status

What's New
The new credit scoring model will be more sensitive to people with newer credit, also called "young credit" or "thin credit," which includes consumers without much credit history and those seeking new credit. Financial institutions want this information in order to ensure potential borrowers aren't becoming excessively obligated and over-extending themselves.

Because banks, lenders and creditors are changing their underwriting guidelines almost daily, it's more important than ever to
work with people you know and trust. You always want to make sure you are getting the right information.

April's Home Value Improver

Make the Most of Small Spaces

If your living arrangement allows you to sit and read a book while simultaneously making tea, you know the benefits of living in a small space. Think of the real estate agent's favorite euphemism about small spaces: cozy. If your small place is feeling more crowded than cozy, it's time to make some changes. Not only will you enjoy the new spacious feel, you'll likely increase your property value. Clutter is an immediate turn-off to potential buyers.

When you've decided to make your small home look more open and airy, think about these tips:

  • Remember the first time you realized that the produce at the grocery store only looked so abundant because of a mirror behind it? Well, the same principle holds true for a small room. A mirror will make a room look bigger, especially when reflecting light from a window.
  • Don't cover up windows. Allowing the outside in is not only pleasant, it makes a room appear larger. Curtain rods that extend beyond the window let in more light, too.
  • Light colored paint will open up a room, especially if the entryway leading to that room is painted a darker color.
  • If knickknacks are your passion, you don't have to say good-bye to your tiny frog statue collection. Instead, display your collection with some purpose on a nice shelving unit designed for just that purpose.
  • Be honest with yourself when deciding what to keep around. If you're really tight on space and there is something you don't use, get rid of it. It doesn't have to be forever, but send it on a trip to the basement or other storage spot. I had a client who could not part with a banana yellow vinyl chair that her grandmother had bought with green stamps! Her living room is much more open now, and putting in a load of laundry in the basement is a little more fun now because she can visit the chair.

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Got questions about real estate financing? Contact Debbie at Debbie@westchester- mortgage.com or 617-965-1236. She'll consider them for inclusion in a future column. Debbie Siegel is president of Westchester Mortgage in Newton, MA. She is licensed in several Northeastern states.

You can't pick up a newspaper, go on line or watch the news without being bombarded with scary stories about the economy, the housing market and the credit crunch people are experiencing.

It's important to remember when taking in these messages that the media's objective is to sell advertising and increase readership and viewership by creating drama and excitement. So while there are real issues we need to deal with, the reality is often not as dire as the media makes it out to be.

Now more than ever, it's a good idea to work with people you get referred to. People are still buying and refinancing to get lower rates. Houses are still selling for the asking price (if priced right). The world really isn't coming to an end - yet!

Please feel free to call or email anytime for more information on any mortgage topic!

Best regards,
Debbie Siegel
Westchester Mortgage

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Click here to read my "Mortgage Minute" in ForeclosuresMass.com's monthly newsletter. This month's topic: "Economic Stimulus Package Ushers in Changes to the Mortgage Industry."

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