FICO Credit Scores Requirements To Qualify For Mortgage Loans

This Article Is About FICO Credit Scores Requirements To Qualify For Mortgage Loans

Every who has applied for credit and has had credit, whether good or bad, has a credit score. The FICO score is a mathematical scoring formula that consists of several variable factors to determine a person’s credit risk level. FICO stands for the Fair Isaac Company who has created the FICO credit scoring model.

What Are FICO Credit Scores Used For?

Credit scores are 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 credit score a person can have is 300 and the highest FICO credit score a person can have is 850. A good credit score is 720. FICO credit scores of 660 or lower signal 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 the credit risk you are.

Other Credit Models

The FICO credit score is not the only credit scoring model out there. 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.

Credit Score Composition

Below is how your FICO credit score is derived:

  • Past payment history consists of 35% of overall credit score
  • The amount of debt owed versus the available credit is 30% of the overall credit score
  • Length of time consumers has had credit consists of 15% of the overall credit score
  • New credit application consists of 10% of the overall credit score
  • Credit type consists of 10% of overall credit score

Always Be Aware Of FICO Credit Scores

FICO Credit Scores

Remember that higher credit scores mean lower interest rates, which means saving money. A higher FICO credit score can save thousands of dollars in mortgage interest expenses and other interest expenses. Borrowers with a higher credit score mean 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 us at Gustan Cho Associates, the one-stop mortgage and real estate information center. Check out our credit rebuilding and reestablishing program and the credit repair blogs. Do not hire any credit repair companies to repair your credit. Credit repair companies are a waste of money and will do more damage than good if you are planning on applying for a mortgage. Credit disputes are not allowed during the mortgage process unless the credit disputes are exempt disputes. You do not need a credit repair company. You should try to maximize your credit scores a few months prior to applying for a mortgage. Just paying down credit card balances will skyrocket credit scores.

Contact Us To Qualify For A Mortgage

The team at Gustan Cho Associates are experts in helping our clients rebuild and reestablish their credit. We have helped countless clients rebuild and reestablish their credit scores after bankruptcy. We have some simple quick tips in getting your credit scores over 700 FICO in less than one year after the Chapter 7 Bankruptcy discharged date. We highly recommend consumers enroll in a credit monitoring service like Credit Karma. This service is invaluable in monitoring your credit report. The credit monitoring service will alert you via email and/or text if there are any changes in your credit report such as a hard inquiry or addition of credit tradelines. The key is to make sure you pay all of your monthly debts on time. Never be late. Monitor your credit report and scores like you are monitoring your bank account. 

Leave a comment