FICO Credit Score for Home Mortgage Loans
FICO stands for Fair Isaac Company, the company that created the original scoring model. The FICO credit score is a tally of scores of all three credit bureaus. It is the tool used by lenders in evaluating the risk associated doling out mortgages to lendees. Your FICO Credit Credit score considers only those items on your credit report. Mortgage lenders will look at other factors not on the report as well such as incom and employment history.
How to Obtain Your FICO Score
Obtain your FICO Score on the internet at Annual Credit Report.com.
How is the FICO Score Calculated?
The FICO Credit Score is calculated by your credit report & debt-to-income ratio. Questions are asked regarding your financial situation and points are accumulated for the answers. Typical FICO Credit Score factors include:
- How long you've lived at your current address
- Your job or profession
- Your financial obligations (debt-to-income ratio)
- Number of late payments (if any)
- The amount of credit you have outstanding
- The amount of credit you are using
- The amount of time you've had credit established
Most Weighted Factors in FICO Credit Score
- Current balances on accounts
- Too few or too many bank revolving accounts
- Number of accounts with balances
- Number of accounts opened in the last 12 months
- Length of time accounts have been established
- Amount of past due accounts
- Number of delinquent accounts
- Few accounts rated "current,"
- Recent derogatory public record of collection
- Past due balances
- Number of credit inquiries made.
What is Considered a Good FICO Credit Score?
The magic FICO number is 620.
- 620 or Below = High Risk (May be declined)
- 620 to 650 = Questionable (Will need further documentation)
- 650 + = Cream of the crop (Definite approval)
Which parts of my Credit History are most important for the FICO credit score?
The following percentages can be used as a general guide for weighing the importance of the FICO credit score.
- 35% - Your Payment History
- 30% - Amounts You Owe
- 15% - Length of Your Credit History
- 10% - Types of Credit Used
- 10% - New Credit
Payment History
Your Payment History Includes:
- Number of accounts paid on time
- Collection accounts or public records
- Delinquent accounts:
- Total number of past due items
- How long you've been past due
- How long it's been since you had a past due payment
Amounts You Owe
- Amount you owe per account
- Types of accounts with balances
- Revolving Credit Accounts (Are you over-extended?)
- Installment Loan Amounts vs original balances
- Number of zero balance accounts
Length of Credit History
- Total time period tracked by your credit report
- Length of time since accounts were opened
- Time that's passed since the last activity
- The longer your (good) history, the better your scores
Types of Credit
- Number of accounts and account types (installment, revolving, mortgage, etc.)
- A mixture of account types usually generates better scores than reports with only numerous revolving accounts (credit cards)
New Credit:
- Number of accounts you've recently opened vs. total accounts
- Number of recent credit inquiries
- The time that's passed since recent inquiries or newly-opened accounts
- If you've re-established a positive credit history after encountering payment problems
- In general, checking to make sure you aren't attempting to open numerous new accounts
How can I improve my FICO Score
- Get a copy of your credit report
- Check credit report for errors
- Pay bills on time
- Keep debt to a minimum
- Mix the type of credit that you use
How long will it take to improve my credit score?
"Negative items affect your credit score much more quickly than positive items. Late payments can negatively affect your score in just a few months, whereas paying bills on time may take 6 to 12 months to generate a significant improvement in your score."
What is the minimum FICO score needed to obtain a home loan?
A minimum of 500 middle score is needed for all borrowers.
FICO Terms
Middle FICO Score: The middle score or the average of all three credit bureau scores.
Credit Score Resources
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