The Importance Of FICO Credit Scores In Mortgage Process
This BLOG On The Importance Of FICO Credit Scores In Mortgage Process Was UPDATED On July 29, 2017
- The FICO credit score is a mathematical scoring formula which consists of several variable factors to determine a person’s credit risk level.
- FICO credit score stands for the Fair Isaac Company who has created the FICO credit scoring model.
What Are FICO Credit Scores Used For?
The FICO credit scores is mainly used for evaluating a consumer’s creditworthiness by yielding a certain numerical score which is derived by the information which is contained in the person’s personal credit report with the combination of the person’s debt to income ratio.
- The lowest FICO credit scores a person can have is 300 and the highest FICO credit scores a person can have is 850.
- A good FICO credit scores is 720.
- A FICO credit scores of 660 or lower signals that a person’s credit is poor and with that score, the person will have trouble in obtaining credit and if they do, they will most likely pay a high interest rate.
- The lower your FICO credit scores, the higher credit risk you are.
Other Credit Models
The FICO credit score is not the only credit scoring model out there and not all creditors and lenders use the FICO credit score model. However, other credit scoring models are very similar to the FICO credit score model.
In this blog, we will only discuss the FICO credit score model
Credit Score Composition
Below is how your FICO credit score is derived;
- Past payment history consists of 35% of overall credit score.
- Amount of debt owed versus the available credit is 30% of overall credit score.
- Length of time consumers have had credit consists of 15% of overall credit score.
- New credit application consists 10% of overall credit score.
- Credit type consists of 10% of overall credit score.
Always Be Aware Of FICO Credit Scores
Remember that higher credit scores means lower interest rates which mean saving money.
- A higher FICO credit score can save thousands of dollars in mortgage interest expense and other interest expense.
- A higher credit score means lower insurance premiums.
- Folks with bad credit scores not only pay much more than those with higher credit scores but lower credit scores could mean job denials and not being able to get promoted due to credit background checks.
- Please visit Credit Fix Advisors, the one stop free mega credit information shop.
- Check out their credit repair program and the credit repair blogs.