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Sample Client Flyer — How to Scrub Your Credit Score

No one has to tell you how credit scoring affects the interest rate pricing on mortgage loans!

Consumers however, have a vague understanding of how it works - but know it's an important component when it comes to credit cards, auto and homes loans.

Reprinted from an article in Money Magazine, it contains 5 simple questions with detailed answers about:

  • How to get a credit score.
  • How to increase the score.
  • Credit scoring scenarios.
  • What will hurt your credit score.
  • Annual interest rate savings.

Listed below are the questions asked on the flyer. Subscribers can download the complete flyer and insert your name, picture and contact info. You may even consider posting this on your website.

How to Scrub Your Credit Score

You know a higher credit score can mean big savings. But do you know what really affects your number - and how to improve it? Take our test and find out.

  1. First step: Find out your number. Luckily, you're now entitled to one free credit score a year from the three big credit bureaus. True or false?

    2. Answer: False. It's true that three credit reports a year are now free for the asking, but you still have to pay for your credit score. If you haven't ordered a free report recently (nearly half of Americans have never done so), don't delay: One in four contain errors serious enough to result in a denial of credit. As for your score, the scale ranges from 300 to 850; the median is 723. The higher your score, the lower the interest rate you'll be charged when you borrow.

  2. You got your score, and it's below 700. What can you do to raise it? (Choose all that apply.)
    • A - Get a higher-paying job.
    • B - Pay off fines for overdue library books.
    • C - Pay your bills on time.
    • D - Make partial payments on past-due accounts

    Answers: B, C and D. You'll certainly enjoy the bigger paycheck, but it won't boost your credit score. Making timely payments is what matters most, accounting for 35% of the total score (yes, unpaid library fines count too, if they go into collections). Six to 12 timely payments in a row should be enough for you to see a difference in your score. Can't clear your debts? At least make a partial payment on accounts in arrears; the longer the debt is overdue, the more it will drag down your score.

  3. Which scenario will give you the better credit score?
    • A - A $2,200 balance on a credit card with a $3,000 limit.
    • B - A $3,000 balance on a total credit limit of $15,000.

    Answer: B It's not just the total amount you owe that's important; it's how much you owe relative to how much you can borrow. This ratio, in fact, is another critical factor in determining your score. To avoid looking overextended to lenders, try to keep your debts to 30% or less of your available credit, and don't rush to close unused credit-card accounts.

  4. You hope to nab a better rate on a car loan by shopping among lenders for the best deal. Will that hurt your score? Yes or no

    5. Answer: No It's true that applying for several credit cards within a short time will ding your score, but lenders know that searching for the best rate on a loan is a smart strategy. With that in mind, credit score formulas simply ignore any rate shopping you've done in the 30 days before your score is calculated; multiple mortgage or auto-loan applications within a 45-day period are treated as a single credit inquiry. And don't worry about possible fallout from checking your own credit rating - scorers don't hold that against you either.

  5. Okay, you're committed to improving your score. How much will you save annually on a $250,000, 30-year-fixed-rate mortgage if you're able to raise your score from 630 to 720?
    • A - $360
    • B - $1,430
    • C - $2,780
    • D - $3,060

    Answer: C Better credit really is well rewarded. At recent interest rates, with a score of 720 you would save $2,780 a year, or a little more than $230 a month, on that mortgage, according to Fair Isaac, the leader in the credit scoring business. Boost your score to 760 or more and you save another $435 a year. And then there's the possible savings on credit-card rates. Raising your score from 600 to 720 could drop your credit-card rate from 18% to 9.6%. If you carry a $3,000 balance, you'll save $258 in interest charges each year. Not a bad payoff for good behavior.

Where can I find more detailed information?

Check out www.MyFICO.com where it will allow you to enter your information and obtain tips on exactly what to do to increase your credit score.

Download a copy of the client flyer now.

Copyright - 2006 - Money Magazine & David Futrelle

Copyright - 2006 - LoanOfficerMagazine.com