FICO Score - a Brief Explanation
When you apply for a mortgage loan, you expect your lender to pull a credit report
and look at whether you've made your payments on time. What you may not
expect is that they seem to be more interested in your "FICO" score.
"What's a FICO score?" is a common reaction.
Each time your credit report is pulled, it is run through a computer program with a
built-in scorecard. Points are awarded or deducted based on certain items such
as how long you have had credit cards, whether you make your payments on
time, if your credit balances are near maximum, and assorted other variables.
When the credit report prints in your lender's office, the total score is displayed.
Your score can be anywhere between the high 300's and the low 800's.
Lenders wanted to determine if there was any relationship between these credit
scores and whether borrowers made their payments on time, so they did a
study. The study showed that borrowers with scores above 680 almost always
made their payments on time. Borrowers with scores below 600 seemed fairly
certain to develop problems.
As a result, credit scoring became a more important factor in approving
mortgage loans. Credit scores also made it easier to develop artificial
intelligence computer programs that could make a "yes" decision for loans that
should obviously be approved. Nowadays, a computer and not a person may
have actually approved your mortgage.
In short, lower credit scores require a more thorough review than higher scores.
Often, mortgage lenders will not even consider a score below 600.
Some of the things that affect your FICO score are:
Delinquencies
Too many accounts opened within the last twelve months
Short credit history
Balances on revolving credit are near the maximum limits
Public records, such as tax liens, judgments, or
bankruptcies
No recent credit card balances
Too many recent credit inquiries
Too few revolving accounts
Too many revolving accounts
FICO actually stands for Fair Isaac and Company, which is the company used by
the Experian (formerly TRW) credit bureau to calculate credit scores.
Trans-Union and Equifax are two other credit bureaus who also provide credit
scores.
and look at whether you've made your payments on time. What you may not
expect is that they seem to be more interested in your "FICO" score.
"What's a FICO score?" is a common reaction.
Each time your credit report is pulled, it is run through a computer program with a
built-in scorecard. Points are awarded or deducted based on certain items such
as how long you have had credit cards, whether you make your payments on
time, if your credit balances are near maximum, and assorted other variables.
When the credit report prints in your lender's office, the total score is displayed.
Your score can be anywhere between the high 300's and the low 800's.
Lenders wanted to determine if there was any relationship between these credit
scores and whether borrowers made their payments on time, so they did a
study. The study showed that borrowers with scores above 680 almost always
made their payments on time. Borrowers with scores below 600 seemed fairly
certain to develop problems.
As a result, credit scoring became a more important factor in approving
mortgage loans. Credit scores also made it easier to develop artificial
intelligence computer programs that could make a "yes" decision for loans that
should obviously be approved. Nowadays, a computer and not a person may
have actually approved your mortgage.
In short, lower credit scores require a more thorough review than higher scores.
Often, mortgage lenders will not even consider a score below 600.
Some of the things that affect your FICO score are:
Delinquencies
Too many accounts opened within the last twelve months
Short credit history
Balances on revolving credit are near the maximum limits
Public records, such as tax liens, judgments, or
bankruptcies
No recent credit card balances
Too many recent credit inquiries
Too few revolving accounts
Too many revolving accounts
FICO actually stands for Fair Isaac and Company, which is the company used by
the Experian (formerly TRW) credit bureau to calculate credit scores.
Trans-Union and Equifax are two other credit bureaus who also provide credit
scores.
Still have questions? Contact me today for a free
consultation!
consultation!
Colin O’Neal
Buyer’s Agent
200 North Rufe Snow Drive, Ste.102
Keller, TX 76248
(817) 898-0145 Office
(817) 898-1771 Fax
colin@househuntersdfw.com
Buyer’s Agent
200 North Rufe Snow Drive, Ste.102
Keller, TX 76248
(817) 898-0145 Office
(817) 898-1771 Fax
colin@househuntersdfw.com
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All other products or services mentioned herein are trademarks of their respective companies. Please read our privacy policy.
© 2003 HouseHunters. None of the text or images on this page may be reproduced without the express written consent of HouseHunters. All rights reserved.
All other products or services mentioned herein are trademarks of their respective companies. Please read our privacy policy.
All other products or services mentioned herein are trademarks of their respective companies. Please read our privacy policy.
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