The second area that contributes to a highquality credit profile is what I call your“ revolving accounts portfolio.” This is the collection of all of your revolving accounts: credit cards, credit lines, charge cards, and HELOCs( home equity lines of credit). The most important score contribution to you’ re revolving accounts portfolio is your balance to limit ratio( known in the industry as utilization), followed by the average age of your revolving accounts portfolio. Next priority is the quality of each individual account. Quality is defined by the“ tier” of the lending institution and the contribution of the account to the quality of the profile. While I can ' t go into great detail here, you need to know credit instrument quality ranges from Tier 1 banks and 100 % contribution to Tier 4 lenders and 40 % contribution. Until now, we were never trained on how to build a highquality fundable credit profile and so many of us have lowvalue“ junk” cards which show a lender a lack of credit sophistication.
The third area of a highquality credit profile is your installment loan portfolio. As with your revolving account portfolio, you can have a Tier 1, 100 % quality loan, and you can have a Tier 4, 40 % quality loan. The quality of the loan contributes to or detracts from the quality of your credit profile and the quality of your credit profile determines your fundability.
Are you FUNDABLE, or Do You Just Have a Good Score?
The next contributor to a highquality credit profile are your inquiries. Inquiries count against your credit score for 12 months, but what we were not told is that the inquiries count against underwriting and fundability for 24 months. FICO ® and lender underwriting software downgrade your fundability significantly when you have too many inquiries. How many is too many? FICO ® allows one inquiry per six months without a significant degradation of your credit score or fundability.