Identity Theft Can Ruin Your FICO Score

Have you heard of a FICO score?  It's the score the major credit bureaus give you based upon numerous criteria which allows lenders to see how well you do at repaying your debts.  However, identity theft can ruin you and your FICO score in a very short period of time.

As much as 35% of your FICO score is determined based upon your payment history.  This means if your identity is stolen and someone is racking up credit in your name without paying the bill, each time a payment is missed your credit score is taking a major hit.  This can reduce your score dramatically over just a few short months with missed or late payments.  In the case of identity theft you are typically dealing with missed payments which hurts even more than a late payment does.

Another major hit you can take is 10% of your FICO score is dependant upon new credit that is opened.  If you are the victim of identity theft you have likely had at least one, if not several, new accounts opened.  By themselves, this typically does not hurt your FICO score that much, but when added to the 35% chunk for payment history, you can begin to see how this can really hurt you very quickly.

Your next problem is in the amounts you owe.  If you are the victim of identity theft you'll likely have had a new account opened, which is most likely also maxed out.  This means you owe a huge amount of money suddenly that you are not aware of.  This can reduce your credit score very quickly because the amount owed on your credit file is as much as 30% of your FICO score.  Add to this the 35% for payment history and 10% for new credit and you are looking at a whopping 75% of your credit score now in jeopardy based upon identity theft alone.

The next major blow is to your length of credit history.  As new accounts are opened, the average life of your credit file changes to accommodate these new accounts.  This can change your score by as much as 15%.  When added with the other 75% already at risk, you are looking at a 90% impact to your credit score for the worse. 

Imagine how quickly identity theft can leave your credit report and score in shambles and suddenly protecting yourself from identity theft is very important.

Have you been the victim of identity theft?  Know of someone else who has?  We'd love to hear your comments.  Just click the comment link below and leave us your thoughts.

Who Can't Get a Mortgage Now?

For the average American looking for a home loan, the crisis in the subprime mortgage market may actually be good news.

Not only have home valuations come down, but interest rates are still historically low.  In addition, tightened lending standards stemming from the subprime crisis likely means fewer buyers, pushing down home prices.

The one catch is: You have to be a buyer with good credit, a low debt to income ratio, a healthy down payment, verifiable income, and looking to finance less than $417,000 (the cutoff for so-called jumbo loans).

If you're among the 10 percent of people with credit scores below 620 who need a subprime mortgage, things could get tricky.

If you're not sure whether you would qualify for a mortgage under today's tougher standards, or what your credit score might be, contact us or leave a comment below.  We'll get back to you with answers.