Quick Search


view all


Any

Any

No Min.

No Max.

Contact Me





* fields are required
Back to Table of Contents

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 850’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.

Back to Table of Contents
Kathleen Adams
Coldwell Banker Lakes Realty

8520 100th Avenue
Canadian Lakes, MI 49346
Phone: 231-250-3197
Office: 231-972-8300
Email: kadamscblakes@gmail.com
Website:  http://www.canadianlakeshomes.com
Blog:  http://www.canadianlakeshomesblog.com
 

Blog

Four Ways to Maximize the Appeal of Your Open House

Four Ways to Maximize the Appeal of Your Open House No matter how you sell your home, an open house can be the perfect platform to attract buyers. If your house does not look as appealing as possible, you may find that buyers lose interest. By followi... Read more

Are Realtors Really Home Adivsors?

Home Advisor is a really nice website full of helpful information on companies that provide services for the homeowner. From carpenters to fences and everything in between, if you need a service on your home, you can find people on Home Advisor. They ... Read more
View All

ABR - Accredited Buyer Representativee-PROEqual Housing OpportunityMLS membershipREALTOR® certification

Real Estate Websites by iHOUSEweb iconiHOUSEweb | Admin Menu