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My Credit Plan is the nation's leading FICO® Score improvement program with an average score improvement of 73 points! If you want to increase your FICO scores, set up an account today and start your credit score journey to higher levels! There is a minimal charge for services. My Credit Plan and its blog is operated by Family Financial Education Foundation, a 501 (c) (3) non-profit credit counseling agency. This blog offers many unique insights from direct research. My Credit Plan's blog and website are designed to help you find the correct answers to many of your questions, explain why, correct misinformation, and identify solutions to improve your FICO scores. Let’s go! (Information referenced on this blog must be sourced.)

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Question number 1

Hard inquiries lower credit scores. A mortgage (credit report) inquiry is different than a regular hard inquiry. A home buyer can have his / her credit report pulled by multiple mortgage lenders within how many days in order to have all mortgage inquiries count as only one hard inquiry in the (mortgage) Classic FICO credit scores?

FICO states:

“If your FICO Scores find some, your scores will consider inquiries that fall in a typical shopping period as just one inquiry. For FICO Scores calculated from older versions of the scoring formula, this shopping period is any 14 day span.”

Multiple mortgage inquiries from shopping for a mortgage, as long as they are within 14 days, all count as one hard inquiry. If additional mortgage inquiries are requested by mortgage lenders, each one will count as an additional hard inquiry.  

The 14 day period to shop mortgage companies starts with the first one and goes 14 days.

 

Question number 2

A potential homebuyer increases his / her (mortgage) Classic FICO® credit scores from 679 to 680, Applying for a 5% down, 30-year conventional mortgage, how much by percentage does that change in credit score improve the homebuyer’s purchasing power?

Let’s look at 2 potential homebuyers – one with a 680 credit score and a second with a 679 credit score.

 

30 Year Fixed Rate Mortgage with 5% Down Payment
  Buyer A Buyer B
Credit Score 680 679
Interest Rate 4.00% 4.25%
Mortgage Balance $300,000 $278,440
Monthly Principal and Interest Payment $1,432.25 $1,369.75
Monthly Mortgage Insurance Payment $245.00 $307.50
Total Monthly Payment (P.I. & M.I.) $1,677.25 $1,677.25

 

 

Increase in Purchasing Power -  300,000 divided by 278,440 is 7.7% increase.

Buyer A has a 680 credit score and Buyer B has a 679 credit score. Buyer A gets a 4.00% interest rate while Buyer B has a rate increase from the lower credit score that puts the interest rate at 4.25%.

The mortgage insurance on the loan is different in both situations. For a $300,000 mortgage, the mortgage insurance on Buyer A is $245 a month. The mortgage insurance for Buyer B is $307.50 because of the 679 credit score. 

Payments in both scenarios is $1,677.25.

The difference in loan amounts for the same payment is a 7.7% increase in loan amount – or purchasing power. 

 

Question Number 3      

The majority of auto lenders use which credit score model to approve their auto loans?

About 70% of all auto lenders use the Classic FICO credit scores (goes to 850) found at My Credit Plan, to approve their auto loans. About 30% of auto lenders use the FICO 8 Autoscore which goes to 900. This is according to the largest credit agency who compiles credit reports for all types of lenders.

 

Question Number 4

A consumer increases his / her (auto) credit score from 679 to 680. Applying for a 6 year auto loan with nothing down, how much by percentage does that change in credit score improve a consumer’s purchasing power?

72 Month Fixed Rate Loan with No Down Payment
  Buyer A Buyer B
Credit Score 680 679
Interest Rate 4.49% 6.24%
Auto Loan Balance $30,000 $28,531
Monthly Payment $476.08 $476.08

 

Increase in Purchasing Power -  30,000 divided by 28,531 is a 5.1% increase in purchasing power.

Buyer A has a 680 credit score and Buyer B has a 679 credit score. Buyer A gets a 4.49% interest rate while Buyer B has a rate increase from the lower credit score that puts the interest rate at 6.24%.

Payments in both scenarios is $476.08.

The difference in loan amounts for the same payment is a 5.1% increase in loan amount – or purchasing power.

  

  

  

Results from the October 2019 Survey - 

1. What type of account should a responsible 18-year old first establish to build higher credit scores? 

76% Accurate

2. Many worry about their credit utilization ratio on credit cards. How is the credit card balance established when it appears in your credit report?

72% Accurate

3. Which specific credit score model is used by all mortgage lenders?

62% Accurate

4. How long does a 'hard' inquiry lower your lender's credit scores?

31% Accurate

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