Credit Score (FICO) Secrets…


If you’ve ever applied for credit for a home loan or a car loan, then you’ve probably seen your credit report. These lenders consider you credit worthy or having an unworthy credit report based on a certain criteria. These lenders base their decision on many factors, including your Credit Score. One of my clients have a FICO Score of 832 (the last lender they used said it was the highest score, he has ever seen). It meant they bought a home without verifiable jobs or income. You can see the importance of your Credit Score.

To improve your FICO Score there are things you can do to develop a solid credit history that will improve your FICO score.

Pay your bills consistently on time – recent late payments are more harmful to your score than older late payments.

Check your credit report and remove any errors – inaccurate information on your credit report can lower your score.

Keep your debt reasonable – as a general rule, your account balances should be below 75% of your available credit.

Maintain only a reasonable amount of unused credit – having ready access too much money (instant debt) can make you an unsatisfactory credit risk.

Avoid too many inquiries – inquiries can be interpreted as a sign that you are seeking credit and could overextend yourself or may be in financial difficulty.

WHAT’S IN A SCORING MODEL?

Recent payment history

The amount of credit you have access to and are using

How long a credit history you have

Whether you’ve been shopping for credit

Notification of collection and public record items such as liens and bankruptcies

WHAT’S NOT?

By law, lenders–and scoring models–are prohibited from considering factors such as:

Your race – Your religion – Your gender, whether you’re married, single or divorced

Where you were born.

Although there are dozens of scoring models being employed (and more on the way) the most well-known company in the scoring business is Fair, Isaac and Company, known as FICO Scores (you can get your FICO score here).

A numerical score is then developed, typically ranging from 300 to 900, with the low end of the scale indicating a poor credit risk. This can tell a lender whether or not he’ll lend to you.

What’s in your score?

According to FICO, the breakdown of your score is as follows:

35% of the score is determined by payment histories on your credit accounts, with recent history weighted a bit more heavily than the distant past;

30% is based upon the amount of debt you have outstanding with all creditors;

15% is produced on the basis of how long you’ve been a credit user (a longer history is better if you’ve always made timely payments);

10% is comprised of very recent history, and whether or not you’ve been actively seeking (and getting) loans or credit lines in the past few months;

10% is calculated from the mix of credit you hold, including installment loans (like car loans), leases, mortgages, credit cards, etc.

You Can E-Mail Me Any Real Estate Question, I Am Always Willing To Answer Or Help With Your Questions, Problems Or Concerns.

larry@robertsonrealtor.com or Call: 909.983.2892

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