Do You know your FICO score?
FICO scores are used by lenders to pre-determine the type of credit risk you are expected to be. The score is a numeric value of all the information in your credit report. FICO is an acronym for Fair Isaac Co. which was the company that founded the system. Scores range from 300 to a high of 850. If your score is over 720 you will generally qualify for the best rates and terms. We call that “A” grade paper. Scores below 620 are generally considered “B” paper and that person would have to pay a higher interest rate and likely would need a larger downpayment. Certain loan programs would not even be available for low scoring people.
The score is based on numerous events that are considered an accurate reflection on and predictor of your creditworthiness. The exact criteria used and the “points” assigned for each item is a closely guarded secret. However we do know of several things that are considered in the scoring process: Payment historylate payments, collections, bankruptcies, number of credit cards, the amount of credit used up on the card versus the credit limit, number of times you have applied for credit or checked your score, length of time at current residence, total credit outstanding and other facts. Contrary to common opinion, it is not based on income.
It is not uncommon to find errors in your credit report. In order to fix those errors and the subsequent FICO score that will be generated, I recommend that you meet with your lender early in the home buying process so a credit report can be pulled and any errors corrected. It is not at all unusual to see it take a month or 2 to get errors fixed. There are 3 generally used credit reporting agencies. They are Experian, Equifax and TransUnion. Your lender usually takes the middle FICO score of the 3.
FICO scores are used by lenders to pre-determine the type of credit risk you are expected to be. The score is a numeric value of all the information in your credit report. FICO is an acronym for Fair Isaac Co. which was the company that founded the system. Scores range from 300 to a high of 850. If your score is over 720 you will generally qualify for the best rates and terms. We call that “A” grade paper. Scores below 620 are generally considered “B” paper and that person would have to pay a higher interest rate and likely would need a larger downpayment. Certain loan programs would not even be available for low scoring people.
The score is based on numerous events that are considered an accurate reflection on and predictor of your creditworthiness. The exact criteria used and the “points” assigned for each item is a closely guarded secret. However we do know of several things that are considered in the scoring process: Payment historylate payments, collections, bankruptcies, number of credit cards, the amount of credit used up on the card versus the credit limit, number of times you have applied for credit or checked your score, length of time at current residence, total credit outstanding and other facts. Contrary to common opinion, it is not based on income.
It is not uncommon to find errors in your credit report. In order to fix those errors and the subsequent FICO score that will be generated, I recommend that you meet with your lender early in the home buying process so a credit report can be pulled and any errors corrected. It is not at all unusual to see it take a month or 2 to get errors fixed. There are 3 generally used credit reporting agencies. They are Experian, Equifax and TransUnion. Your lender usually takes the middle FICO score of the 3.
If you would like more information on FICO scores and how they affect your ability to buy please gice me a call or drop me an e-mail.
Rick Lorenz CRS, ABR Broker with Team Lorenz @ The Wells Group 1-800-955-0259 or my direct line at 970-375-7007. e-mail Rick@BuyDurango.com
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