My New Blog

Financially stressed homeowners looking to cut their mortgage payments through a loan modification, short sale or principal reduction under one of the Obama administrations programs, need not wreck their credit score in the process.

In fact, according to a new study covering more than 400,000 active consumer files, some modification options can increase your credit scores rather than hurt them.  Other alternatives to modification --such as foreclosure or bankruptcy can tank your scores and take years to recover.

The study was conducted by VantageScore Solutions, a joint venture created by the three national credit bureaus, Equifax, TransUnion, and Experian.  The VantageScore, now being used by growing numbers of mortgage lenders and banks is designed to be an alternative to the long dominant FICO scores.

The VantageScore scale runs from 501 to 990, which low scores indicating high risk for the lender.  FICO scores run from 300 to 850.

According to VantageScore, LLC the breakout of your Vantage score is as follows:

• 32% of the score is determined by payment histories on your credit accounts;
• 23% is based upon the amount of total credit available in all your accounts which you are currently utilizing;
• 15% is the portion of your score your outstanding balances contribute;
• 13% is determined by the "depth of credit" in your profile (the kinds of credit you hold and how long you've held them);
• 10% is calculated from the number of recent accounts you've opened, and how many credit inquiries have been generated from your search for those loans or lines of credit;
• 7% is the weight applied to the total dollar amount of credit you could potentially utilize.