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Home Mortgage-FICO-What Exactly Is It? ( Part 1)
There are very few things you can do
before applying for a mortgage loan that are more important than
knowing your FICO score. Fair Isaac & Company- the heart of FICO is
the score that greatly determines your interest rate on any
loan-car, furniture, home equity, and of course on credit cards. It
can even determine IF you get the loan.
A FICO score is a
composite of many historical factors (as many as 22) used by
millions of people to create a single score that is used by
virtually all lenders to predict future behavior. Among the factors
are:
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Late payments
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The amount of time credit has been
established
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The amount of credit used versus the
amount of credit available
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Length of time at present residence
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Employment history
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Negative credit information such as
bankruptcies, charge-offs, collections, etc.
The biggest
credit reporting agencies of Experian, Equifax, and Trans Union put
the major factors of the FICO score into five categories. Some
lenders use one of these figures others use the mid score of the big
three.
Here are the
major components of the FICO score. No secrets here!
PAYMENT
HISTORY: Do you pay your bills on time? Lenders are looking for
trends so one late payment will not hurt. Conversely one on time
payment with the rest being late will not help.
LENGTH OF
PAYMENT HISTORY:
In general, a longer credit history increases your
score. Considerations are;
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How long your credit
accounts have been established.
The score considers
an average age of all your
accounts.
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Frequency of use.
TYPES
OF CREDIT USED
The score will
consider your mix of credit cards, retail accounts, installment
loans, finance company accounts and mortgage loans.
TO BE
CONTINUED IN PART 2...
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