Sep 6, 2012

FICO® Score

Let’s Talk About FICO® Score

FICO® (Fair Isaac & Company) credit scoring system is used by Experian to compile credit profiles and assign credit scores used to evaluate consumers credit worthiness. Although there are 2 additional credit scoring systems used by Trans union and Equifax, FICO® is the best known and is considered synonymous with credit scores.

Your FICO® score will be a major factor in determining the monthly payments on your home purchase, so let have a look at some of the factors used in calculating your score. 

    1. Payment history: is probably the most important factor used in calculating FICO® scores. Information relating to bankruptcy, foreclosures, collections and late payments will be evaluated.   The most recent 2 years history has the greatest impact.
    2. Access to credit: the number of open credit lines and the balances on those lines are also important factors. It is better to have a few strong lines with balances at or below 60% of the maximum credit limit.
    3. Quality and credit type: some of the accounts evaluated by credit bureaus during the calculation of credit scores are mortgages, car payments, student loans, credit lines, credit cards plus any other accounts reported to the credit bureaus (rental payment history is in the process of been added as an evaluated account).  Both open and closed accounts are evaluated with seasoned accounts (accounts with payments of 12 months or more) given higher relevance.

FICO® scores ranging from 620 to 740 and above are considered acceptable by most Mortgage Lenders.  Scores above 740 often qualify for the best interest rates.  Contact a Mortgage Professional for assistance in improving your FICO® score.

By OD Blogger Consumer Credit, Real Estate No comments Tags: , , , , ,