The Mystery of Credit Score Calculations

The Mystery of Credit Score Calculations

Credit ... Credit Building ... Credit Repair ... Credit Reports ... Credit Scores ... Credit Scoring ...  

I feel a bit like Bubba in Forrest Gump at times when I speak or write of credit-related things ...

Why?  

Because such a large number of the questions I receive as a Chicagoland Mortgage Originator revolve around credit and credit topics.   And rightfully so, as credit ... and all things reliant upon credit ... make our world go 'round. 

Our credit and our credit standing (via Credit Scores) affect everything about our lives.  From simple and modern daily needs like acquiring cell phones and securing insurance ... to important life needs.  

Stop and think about it ...  

In this modern age, housing (rental and purchase), employment, security concerns (licensing is demanded in many professions), auto loans, credit cards, application for utility services, building savings, and more are often based on having credit.  And in many circumstances, that credit must be good (or at least "adequately good").  

Given its importance then, it's only natural that questions concerning credit abound.  And it's why I address the topic of credit in so many of my blog articles.  

Here's just a sample of the wide range of credit-related info I've focused on in the past:

• Millennials: How to Establish Credit Quickly and Easily
• How Much are You Willing to Pay for that Poor Credit Score??
• 1 More Reason to Have Good Credit ... and Keep Good Credit
• Is Your Chicagoland Credit Haunted?
• Knowing the Financial Philosophy and Standing of a Potential Partner is Growing in Importance
• It's "FATE and RATE" When Applying for a Mortgage

But one of the questions I hear most often is, "What is the highest Credit Score available?"  Well, unfortunately, providing a quick and easily understood answer isn't simply done.  Here's why ...

There are 3 Major Credit Bureaus:

• Equifax
• TransUnion
• Experian

Each of these credit bureaus is a business and not a service as often referred to.  

In fact, each has its own methodology and model for calculating their separate and independently created credit scores.  Their individual and independent methodologies have a RANGE of scoring unique to their own knowledge of your personal credit history.  

I was reminded of this fact just recently.  A potential client looking to refinance with me was under the impression that he had excellent credit.  He touted, prior to our running his credit report, that his credit scores would certainly be categorized as "the best credit scores available". 

Of course, immediately upon saying this, he quizzed me as to what that credit score number could be?  Not trying to sound evasive, my honest answer reiterated my message above ... 

"Unfortunately, providing a quick and easily understood answer isn't always simply done.  And here's why." 

Residential Mortgage Credit Reports are unique to other industries that use credit analysis.  Other industries such as car dealerships, and their representative banks offering their auto financing, utilize different scoring models.

For Mortgage Underwriting purposes, the scoring ranges from the 3 Major Credit Bureaus (Experian, TransUnion, Equifax) are:

1. Experian:  Scoring Models range from 300 to 850, low to high
2. TransUnion:  Scoring Models range from 309 to 839, low to high
3. Equifax:  Scoring Models range from 334 to 818, low to high

To complicate matters for borrowers and the public, even more, certain "Businesses" that offer credit repair or credit services can also have a different rating scale that they use.  Some of those businesses include credit card companies that offer a "free" credit score to their customers within their monthly statement.  

Hopeful Borrowers contact me thinking they know their credit scores, based upon the "free" credit card company score they've received.  All too often, those "free" credit scores do not represent anything close to the scores a Lender will utilize during a mortgage application.

As you can see, the question regarding "best credit scores available" is not answered quickly or easily ... or even with one simple number.  That number is dictated by the originator of the credit request, as well as the purpose of that request.  That number is dependant on who is asking and for what purpose.

So when it comes to seeking and obtaining a mortgage in order to finance (or refinance) a home or investment property, you need to go to THEE source for your funds in order to gain an answer regarding your credit scores or "best" scores available.  In most cases, that will be a Mortgage Originator/Lender.

I'd add to that advice:  Because a Mortgage Lender's scoring model is the one that you will be dependant on for your financing and financing terms, it's wise to seek a consultation with an Originator early in the purchase (or refinance) process.  That way you have the facts as they pertain to your credit scores.  

You also have time to raise scores, if needed or correct any errors that may appear on your credit report.  This early action on your part can save you big money, as well as time and frustration later. 

Answer all your credit questions ahead of time and be fully prepared and equipped to use the best credit scores available ... and the best mortgage terms possible ... for yourself.  Reach out to me today ...

* When in need of credit, Mortgage info, or mortgage service when buying, refinancing, or investing in a home in New Lenox - or elsewhere in Chicagoland - IL & WI, contact me.
I'll be happy to put my 40+ years of mortgage experience and expertise hard to work on your behalf.
I'm easily found at:

Gene Mundt

Mortgage Originator - NMLS #216987 - IL Lic. #031.0006220 - WI Licensed

American Portfolio Mortgage Corp.

NMLS #175656

Direct: 815.524.2280

Cell/Text: 708.921.6331

eFax: 815.524.2281

gmundt@goapmc.com

www.genemundt.com

   

Gene Mundt, Mortgage Originator, an Originator with 40+ years of mortgage experience, will offer you exemplary mortgage service and advice when seeking:
Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago
and the greater Chicagoland region, including:
The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena,
Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook,
Romeoville, Naperville, etc.), DuPage County, the City of Chicago,
Cook County, and elsewhere within IL & WI.

Referrals are Appreciated and Welcomed

I Ask ... "Do You Think I'm Sexy???" If Not, You Should

I Ask ... "Do You Think I'm Sexy???"

If Not, You Should

Americans are fascinated with houses.  The internet,

advertising, magazine racks, and TV viewing schedules 

revolve around them.

No matter whether it's buying,

building, repairing, remodeling, 

decorating, flipping, investing, 

improving, beautifying ... whew,

it's covered in loving detail.    

There's a never-ending array 

and supply of conversation, advice,

video, showcases, websites, 

and instruction surrounding 

each. 

And who can blame people

for being so fascinated? 

Besides being beautiful and so much fun to look at, homes or 

"home" inspire us.  They are fodder for dreams. 

They provide us protection and security, both literally and in

the financial sense.  They wrap us in a sense of family and 

much much more.

In today's world, that means they're "sexy" ...  

They're appealing, exciting, intriguing, stimulating.  Sexy is

good.  Sexy draws attention.  Sexy keeps someone's attention.

But what of the plans, preparation, and methods for

financing those homes, their building, repair and 

remodeling?  Oooooo ... most don't consider that sexy. 

And THAT'S a huge problem ...

So as a Mortgage Originator ...  

• How do I make my services and advice seem "sexy" to those hoping to buy, refinance, construct, or invest in a home? 
• How do I get a potential buyer/homeowner's attention and keep it? 
• How do I get them to respond?
• How do I inspire them to plan, prepare, and perform before and during their mortgage process?

Mortgages are the method through which most people

are able to acquire their beautiful homes.  And I add ... the 

dreams, their sense of security sought, their feeling of 

"home" or family, etc.

So mortgages and the mortgage process need to be

considered "sexy" too.  Mind-boggling sexy.

Why?

Because as your Mortgage

Originator I need you to find

mortgages, Pre-Qualifications

Pre-Approvals and the

mortgage process sexy.  I

need you down right excited 

about them from beginning 

to finish. 

I need your full and

complete attention for 

your financing.  Through 

every step of the mortgage process. 

And I need you to respond.  Dare I say it?  To perform.  In a

timely manner.  Frustration, stress, and anxiety is sure to set 

in otherwise.  No one wants that.

So I ask again ... "Do you think mortgages and

financing are sexy?"  

To successfully gain the home of your dreams ... either 

through purchase, remodeling, or improvements made over 

time ... your answer should be a loud and enthusiastic "YES"!

When you get in the mood ... 

or when you're in need

of Mortgage info or service when 

buying, refinancing, or investing

in a home in New Lenox - and

elsewhere in Chicagoland - IL & WI ... Contact me.

I'll be happy to put my 40+ years of mortgage experience

and expertise hard to work on your behalf.  I'm easily found 

at:

 

Gene Mundt

 

Mortgage Originator - NMLS #216987 - IL Lic. #031.0006220 - WI Licensed

 

American Portfolio Mortgage Corp.

 

NMLS #175656

 

 

Direct: 815.524.2280

Cell/Text: 708.921.6331

eFax: 815.524.2281

gmundt@goapmc.com

www.genemundt.com

   

Gene Mundt, Mortgage Originator, an Originator with 40+ years of mortgage experience, will offer you exemplary mortgage service and advice when seeking:
Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago
and the greater Chicagoland region, including:
The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena,
Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook,
Romeoville, Naperville, etc.), DuPage County, the City of Chicago,
Cook County, and elsewhere within IL & WI.

Referrals are Appreciated and Welcomed

Taxes Are Inevitable for Will County Property Owners. Tax & Assessment Surprises are NOT

 Taxes Are Inevitable for 
Will County Property Owners
Tax & Assessment Surprises are NOT

     “Tis impossible to be sure of anything 
     but Death and Taxes.”
                        Christopher Bullock, an English actor, and dramatist, 1716
   

For property owners in Will County, IL, the inevitable ... the receipt of a real estate tax bill ... has once again occurred.  


Tax Bills for the County were put in the mail on Friday, May 3rd, 2019, and should, by now, be in most property owner's possession.   

This event and the reaction to it on many social media venues remind me that real estate taxes and their payment remain a very big deal to homeowners.  Property taxes and property assessments affect most in many ways, big and small.  

Because of that, becoming thoroughly informed and educated about property taxes ... plus property assessments, taxing bodies and taxing systems ... is important.  

Property owners need to know: 

• How much their taxes are
• How their real estate is assessed 
• When their real estate is assessed
• How their taxes are calculated
• What their tax rates are
• Where and how they pay their taxes 
• Should they have a Tax Escrow via their monthly mortgage payment, they need to verify that a copy of the tax bill was received by their Lender/Service Provider ... and paid
• When both tax installments are due 
• Should they wish to protest their assessment, they need to know how to start and navigate that process
• More ...

It's also important for property owners to know:  If you're thinking your property tax bill is too high, you must focus on your property assessment, as it is the assessment of your property that you must appeal ... not the tax bill.  

Once you're in receipt of your actual tax bill, it's already too late to protest your Property Assessment for that levied year.  (Errors of fact, however, can be corrected after you've received a tax bill.)  

Any appeal filed must be conducted within 30 days of the receipt of your Assessment Notice.  In Will County, when new assessments are completed they are typically mailed and published in August.  They can also be found on the Will County Supervisor of Assessment's website.

Of special note for those considering a new construction home purchase ...  

It's important that you pay close attention to the topic of real estate taxes as your taxes will "evolve".  What do I mean?

Most borrowers are required to establish an escrow account at the time of loan.  Their escrow account includes their real estate taxes.  In most cases Insurance, Mortgage Insurance, Flood Insurance, etc. payments are also included in the escrow account.  As borrowers make each monthly mortgage payment, their escrow account builds.  

Typically the real estate tax portion of the escrow account is based upon the last available tax bill for that property ... one which was calculated on vacant property.  As a result, the first tax bill received by new construction owners is minimal.  

And subsequently, the Mortgage Escrow Account set-up at the time of the Mortgage Closing has been funded each month by escrow payments based on that low vacant property tax bill.  (Lenders are required to base tax escrow figures upon the most recent tax bill available, and adjust according to annual changes in tax amounts thereafter).

But once the Assessor acknowledges the sale of that property into a completed home, the property assessment is back-dated to the date of Closing.  This back-dating typically results in a much larger tax bill due during the second year of ownership.  

As a result, many new construction homeowners are caught off-guard upon the receipt of this 2nd larger tax bill and find themselves short on saved tax escrow funds because of it.  That often results in them scrambling for funds ... or telephone calls to their LO.

Because of that, I always stress to my new construction buyers/borrowers that it's important to: 

• Gain a thorough understanding of how taxes work prior to buying any new construction home
• Make sure you know what your projected (fully-assessed)  taxes will be on the home you're buying/building prior to signing a Contract
• Plan and prepare ahead for the receipt of the larger tax bill coming (typically in the 2nd year of occupancy)

While Will County Homeowners/Borrowers with escrow accounts are given notice by the County when taxes are due, it's the Mortgage Lender (or the loan servicer) that pays the tax bill installments out of the monies saved in their escrow account.  This is normally a seamless process, but borrowers should verify that their tax payment was successfully made upon its due date.

Possessing a working command of the taxing and assessment processes and the terminology used regarding them definitely helps property owners in many important ways.  

So to assist in that regard, I've put together a handy list of some of the most commonly heard/used tax and assessment terms below.

Property Tax and Assessment terminology:  

• Property Tax - The local tax on the value of real property, land, buildings, and homes
• Tax Rate - The amount of tax due stated in terms of a percentage of the tax base within a certain tax code
• Equalization Factor - A factor that must be applied to local assessments to bring about the percentage of increase or decrease that will result in an Equalized Assessed Value equal to one-third of the Market Value of taxable property in a jurisdiction
• Equalized Assessed Value - The fair market value multiplied by the State-Certified Equalization Factor. Tax bills are calculated by multiplying the Equalized Assessed Value, minus any exemptions, by the tax rate
• Market Value - The most probably Sales Price of a property in a competitive and open market, assuming that the buyer and seller are acting prudently and knowledgeably, allowing sufficient time for the sale, and assuming that the transaction is not affected by undue pressures
• Taxing Body & Tax District - A local governmental unit that levies a property tax. Examples: Park District, Fire Protection Districts, Municipalities, School Districts, Library Districts, etc.
• Exemption - Freedom from the property tax granted to the property in recognition or because it is taxed either directly or indirectly by other means. Example of Exemptions: Homestead, Military Veterans, Senior, Disabled, Home Improvement, Energy, Etc.
• Assess - To place a value on property for tax purposes
• Assessed Value - An Assessed Value is the dollar value assigned to a property to measure applicable taxes. Assessed valuation is the price placed on a home by the corresponding government municipality.  It  determines the value of a residence for tax purposes. 
• Assessor - The government official responsible for establishing the value of a property for tax purposes
• Board of Review - A panel of three residents of a county, experience in real estate appraisal, who review complaints filed by individual taxpayers. The Board of Review has specific statutory responsibilities to perform during a designated period of time
• Ad Valorem Property Tax - A tax imposed on the basis of value.
• Improvements - The value of any buildings or structures existing on land, whether new or old. Improvements may also include certain commercial and industrial fixtures.
• Appeal - 
• Property Index Number - Every parcel of property is assigned a permanent index number, also referred to as PIN. Permanent index numbers are 14 or 16 digits and define the location of your property. Your PIN is located on your tax bill
• Appraisal - The act or process of developing an opinion of value; an opinion of value. An appraisal must be numerically expressed as a specific amount, as a range of numbers or as a relationship (e.g. not more than, more than, not less than, less than) to a specified amount
• Assessment Protest - An assessment appeal or "protest: is the due process a taxpayer may initiate if the assessed value of his or her property cannot be agreed upon with the county assessor. It is a legal process in which a property owner contests a value or assessment either formally or informally on taxable real or personal property. For each year, there are specific statutory dates when an appeal can be made. In Will County, you have 30 calendar days from the date of the notice to file your appeal with the Will County Board of Review. The process should start with contacting your Township Assessor.  Your Assessor can provide you the info and forms you need to start your appeal/protest   

Remember, Will County Taxes are due on:

1. 1st Installment is due June 4, 2019 
2. 2nd Installment is due September 4, 2019

Yes, taxes are inevitable if you are a property owner.  But careful and consistent planning and preparation insure that tax surprises are not.

Although information and guidance is readily available via local municipalities and government offices and websites, always feel free to contact me with your questions.  I'll be happy to hear from you, answer questions, and be of assistance.

* When in need of  Mortgage info or service when buying,
refinancing, or investing in a home in New Lenox - or elsewhere in Chicagoland - IL & WI, contact me.
I'll be happy to put my 40+ years of mortgage experience and
expertise hard to work on your behalf.
I'm easily found at:

Gene Mundt

Mortgage Originator - NMLS #216987 - IL Lic. #031.0006220 - WI Licensed

American Portfolio Mortgage Corp.

NMLS #175656

Direct: 815.524.2280

Cell/Text: 708.921.6331

eFax: 815.524.2281

gmundt@goapmc.com

www.genemundt.com

   

Gene Mundt, Mortgage Originator, an Originator with 40+ years of mortgage experience, will offer you exemplary mortgage service and advice when seeking:
Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago
and the greater Chicagoland region, including:
The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena,
Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook,
Romeoville, Naperville, etc.), DuPage County, the City of Chicago,
Cook County, and elsewhere within IL & WI.

Referrals are Appreciated and Welcomed