"I just never imagined that simply maxing out a few credit cards would cause my credit scores to drop so low"

My credit score is 650 is that good or bad?

Depending on the lender, the type of loan, the amount of down payment, the occupancy type, documentation type and the reason for the loan, a 650 score may or may not be an acceptable credit score. Equifax reports a scoring range between 300 to 850, Experian ranges between 300 to 850 and Transunion scores are from 336 to 843. Most mortgage lenders will pull all three bureaus and use the middle of the three scores to base the loan approval and pricing on.

Don't be discouraged!

If your credit score is lower than average, there are still numerous special loan programs available for borrowers with lower credit scores or limited credit, especially if you are a first time home buyer. It is a good idea to check your credit long before you apply for a mortgage and correct any errors and pay off any collections before you start looking for a house to buy. Do not close your open accounts because you will need these to continue to build your credit rating. Not only will it be easier for you to qualify for a mortgage with good credit but you will save money if you are able to qualify for a lower interest rate with your improved credit score.

FICO scoring was developed by Fair Isaac & Co. in the late 1950s and has become accepted by lenders as a reliable means of credit evaluation. Credit scoring is a method of determining the likelihood that a borrower will default on a loan. The credit score is a representation of the borrower’s credit history in a single number. The Federal Trade Commission has ruled that is acceptable for Fair, Isaac & Co. and the credit bureaus to not disclose exactly how these scores are computed.

Credit scores analyze a borrower's credit history considering factors such as:

	Late payments
	The amount of time credit has been established
	The amount of credit used versus credit available
	Employment history
	Length of time at present residence
	Negative information such as collections, charge offs, bankruptcy, etc.

How can I increase my score? While it is difficult to increase your score over the short run, here are some tips to increase your score over a period of time.

	Pay your bills on time. Late payments and collections can have a serious impact on your score. The more recent the late payment the worse the impact.
	Do not apply for credit frequently. Having a large number of inquiries on your credit report can worsen your score.
	Reduce your credit-card balances. If you have used all your available credit and the card balance is up to the maximum limit this will affect your credit score negatively. Credit card balances should be kept low and well under the available limit.
	If you have limited credit, obtain additional credit.
	If you have negative items that are nearly 7 years old you may want to just leave them alone. They will drop off after seven years. However, if you dispute them the bureaus may re-report them as recent delinquencies which may further reduce your credit score.

What if there are errors on my credit report?

If you see an error on your credit report notify the creditor and report it to the credit bureaus immediately. Make sure you send your error dispute to all the bureaus reporting the error. If possible, contact your creditor and obtain a signed letter on the company's letterhead confirming they made an error and agree to remove it from your credit report. The time you spend correcting credit errors may greatly increase your financial savings through improved interest rates, lower monthly payments and better loan pricing.

Most negative credit will drop off your credit report after seven years. Bankruptcies drop off after ten years. Positive credit history remains on your credit report throughout your life time.

CREDIT BUREAUS:

Transunion Phone (800) 916-8800

Equifax Phone (800) 685-1111

Experian Phone (888) 397-3742

FREE CREDIT REPORT:

You are entitled to receive one free credit report each year. The Department of Financial Intuitions only recommends one website for you to go to receive your free credit report:

www.annualcreditreport.com

You can also receive your credit score for a small additional fee.