FICO Scoring -
What is that?
FICO is a
mathematical model created by the Experian credit bureau as a tool for lenders to use in
evaluating the risk associated with lending you money. FICO stands for Fair Isaac Company,
the company that created the original scoring model. Similar models have been programmed
by the other credit bureaus but they are all referred to as FICO scoring.
How is my score
calculated?
Your score is
calculated by a series of questions based on both your credit report & debt-to-income
ratio. Each answer accumulates a certain number of points that are then added together for
your final score. A typical scoring considers:
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How long you've
lived at your current address.
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Your job or
profession.
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Your financial
obligations (debt-to-income ratio).
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Any late payments.
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The amount of
credit you have outstanding.
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The amount of
credit you are currently using.
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The length of time
you've had credit established.
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Most Weighted
Factors
Current balances
on accounts, too few bank revolving accounts, too many bank revolving accounts, number of
accounts with balances, number of accounts opened in the last 12 months, length of time
accounts have been established, amount of past due accounts, number of delinquent
accounts, too few accounts rated "current," recent derogatory public record of
collection, past due balances, number of credit inquiries made.
What is Considered
a Good Score?
The magic FICO
number is 620. If you score below 620 you are considered to have a very high default risk
giving you the possibility of being declined. If you score between 620 & 650 you will
be put into a "questionable" category where you will have to provide further
documentation to get approved. A score of 650 or above is considered golden or "cream
of the crop," and most likely you will be eligible for the best rate on your loan.
The team at AV HomeConsultants are happy to answer any
other questions you may have. Just give us a phone call or send us an email and let us do our jobs in
helping you to buy your next home or sell your existing one. We're darn good at what
we do - let us prove it to you!
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