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Understanding FICO Scores

In the mortgage lending world, FICO (Fair Isaac) scores either make you or break you when it comes to obtaining a loan or getting the best rate you can. This is the "mortgage scoring" system used to get a conventional mortgage.

FICO scores are numbers calculated based upon your credit history. The better your credit, the higher your number or score will be - the worse your credit, the lower the score.In some instances, lack of credit result in "no score" on your report requiring you to provide "alternative credit" via your rental, utility or telephone payment histories.

There are some lenders that do not use this manner of scoring to the degree that most do.If your score falls in the lower ranges, even if only due to inaccuracies in your credit report, you may need to find one of the lenders that do not heavily emphasize your FICO score. Talk with your mortgage broker or lender to understand what your options are!

FICO scores were created to "simplify" the mortgage lending industry. However, many brokers and lenders feel this manner of scoring creates more problems.

To give you a general idea, we have included the scoring portion of a "sample" credit report. You will not only notice the scores, but also the four main factors which lowered the score.The following table shows the factors that can bring the score down, and gives some points on which to focus to bring it up!

***** BORROWER: DOE, JOHN M. *****

TU: [00627] Reason1=[022] Reason2=[016] Reason3=[028] Reason4=[004]

TRW: [00631] Reason1=[022] Reason2=[016] Reason3=[028] Reason4=[032]

EQUIFAX: [00619] Reason1=[022] Reason2=[016] Reason3=[028] Reason4=[032]

Amount owed on accounts is too high 1 1 1
Delinquency on Accounts 2 2 2
Too few bank revolving accounts 3 N/A 3
Too many bank or nat'l revolving accounts 4 N/A 4
Too many accounts with balances 5 5 5
Consumer finance accounts 6 6 6
Account payment history too new to rate 7 7 7
Too many recent inquiries last 12 months 8 8 8
Too many accounts opened in last 12 months 9 9 9
Proportion of balances to credit limit too high 10 10 10
Amount owed on revolving accounts is too high 11 11 11
Length of revolving credit history is too short 12 12 12
Time since delinquent is too recent or unknown 13 13 13
Length of credit history is too short 14 14 14
Lack of recent bank revolving information 15 15 15
Lack of recent revolving account information 16 16 16
No recent non-mortgage balance information 17 17 17
Number of accounts with delinquency 18 18 18
Too few accounts currently paid as agreed 19 27 19
Time since derogatory public record or collection 20 20 20
Amount past due on accounts 21 21 21
Serious delinquent or derogatory. public record or collection 22 22 22
Too many bank or national revolving accts w/ balances N/A N/A 23
No recent revolving balances 24 24 24
Proportion of loan balance to loan amt too high 33 3 33
Lack of recent installment loan information 32 4 32
Date of last inquiry too recent N/A 19 N/A
Time since last account opening too short 30 30 30
Number of revolving accounts 26 N/A 26
Number of bank revolving or revolving accounts N/A 26 N/A
Number of established accounts 28 28 28
No recent bankcard balances N/A 29 N/A
Too few accounts with recent payment information 31 N/A 31

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