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FICO® Score - a Brief Explanation

When you apply for a mortgage loan, you expect your lender to pull a credit report and look at whether you’ve made your payments on time. What you may not expect is that they seem to be more interested in your FICO® score.

“What’s a FICO® score?” is a common reaction.

Each time your credit report is pulled, it is run through a computer program with a built-in scorecard. Points are awarded or deducted based on certain items such as how long you have had credit cards, whether you make your payments on time, if your credit balances are near maximum, and assorted other variables. When the credit report prints in your lender’s office, the total score is displayed. Your score can be anywhere between the high 300’s and the low 850’s.

Lenders wanted to determine if there was any relationship between these credit scores and whether borrowers made their payments on time, so they did a study. The study showed that borrowers with scores above 680 almost always made their payments on time. Borrowers with scores below 600 seemed fairly certain to develop problems.

As a result, credit scoring became a more important factor in approving mortgage loans. Credit scores also made it easier to develop artificial intelligence computer programs that could make a “yes” decision for loans that should obviously be approved. Nowadays, a computer and not a person may have actually approved your mortgage.

In short, lower credit scores require a more thorough review than higher scores. Often, mortgage lenders will not even consider a score below 600.

Some of the things that affect your FICO score are:

  • Delinquencies
  • Too many accounts opened within the last twelve months
  • Short credit history
  • Balances on revolving credit are near the maximum limits
  • Public records, such as tax liens, judgments, or bankruptcies
  • No recent credit card balances
  • Too many recent credit inquiries
  • Too few revolving accounts
  • Too many revolving accounts

FICO® actually stands for Fair Isaac and Company, which is the company used by the Experian (formerly TRW) credit bureau to calculate credit scores. Trans-Union and Equifax are two other credit bureaus who also provide credit scores.

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I was very selective in finding the right realty and realtor. ERA Kings Bay had outstanding reviews and GInny was an absolutely perfect fit in all the qualities we were looking for. We were treated like family and not as another client. Ginny was patient and made sure we found the perfect home. I thank ERA and Ginny for an exceptional experience. I will definitely recommend ERA Kings Bay and Ginny Jacobs.
Lori was amazing from the first meeting until the day of closing. She was very thorough in explaining the process and helped us every step of the way. Lori kept us informed and was very responsive when we had questions, Lori's knowledge and attention to detail is exceptional. We appreciate the way that Lori communicated and handled every step with her expertise. She made the whole process so easy for us! I would highly recommend Lori to friends and family and she will be my first call the next time I have any real estate needs.
In our opinion, Deborah is the perfect agent. She kept us well informed and responded to our calls in an expedient manner. She was a pleasure to work with and guided us throughout the entire process. We are looking forward too working with her in the future.
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