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WHAT’S A FICO®?

What is a FICO® Score?

FICO® stands for Fair Isaac & Company and is the name for the most well known credit scoring system, used by Experian. The credit bureau’s computer evaluates a complete credit profile and assigns a score, which is used to estimate credit worthiness. Each of the three bureaus (Experian, Trans Union, Equifax) employs its own scoring system, so a given person will usually have 3 separate scores. Someone with a higher score will be viewed as a better risk than someone with a lower score. Typically, scores will range from about 600 to 700 or above, although some cases will be outside this range.

What Kind of Score Do I Need for a Home Loan?

There are as many answers to this question as there are loan programs available. Most lenders will take the average of all 3 scores to evaluate an application. Niche loans, such as Easy Qualifier and low down payment loans will have higher FICO® requirements.

How is My Score Determined?

The FICO® model has 5 main elements:

  1. Past payment history (about 35% of score) The fewer the late payments the better. Recent late payments will have a much greater impact than a very old Bankruptcy with perfect credit since.
    Myth - paying off cards with recent late payments will fix things. Payoffs do not affect payment history.
  2. Credit use (about 30% of score) Low balances across several cards is better than the same balance concentrated on a few cards used closer to maximums. Too many cards can bring down the score, but closing accounts can often do more harm than good if the entire profile is not considered. BE CAREFUL WHEN CLOSING ACCOUNTS!
  3. Length of credit history (15% of score) The longer accounts have been open the better for the score. Opening new accounts and closing seasoned accounts can bring down a score a great deal.
  4. Types of credit used (10% of score) Finance company accounts score lower than bank or department store accounts.
  5. Inquiries (10% of score) Multiple inquiries can be a risk if several cards are applied for or other accounts are close to maxed out. Multiple mortgage or car inquiries within a 14 day period are counted as one inquiry.

How Can I Raise My Score

Your score can only be changed by the way that item is reported directly to the credit bureaus (Experian, TU, Equifax). Written confirmation from the creditor is required. It is best to make these corrections before you try to purchase a home, because you can never be sure the exact impact a change will have on your score.

What Does This Mean to Me?

You should have your credit reviewed BEFORE you look for a home, and work with a PROFESSIONAL loan officer to make sure your loan is based on the most accurate information.

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Mary Ann Moloy, Realtor

Platinum Realty
9393 W 110th St, Suite 170
Overland Park, KS 66210
Phone: 913.909.2527
Email: mmoloy@movewithplatinum.com

"Selling Homes Since 2004!"


Testimonials

In 2011...Mary Ann far exceeded our expectations for a realtor! The process was simplified when needed and detailed when we wanted to know every little bit. ABSOLUTELY NO PRESSURE was ever put on us to make a decision - in fact, there were multiple times that Mary Ann asked us to think about a decision a little longer before making a move. We were never pressured to move from our budget, but she did explain what you gain or lose within certain price points. Most importantly, Mary Ann made sure that our expectations for our first house were met. The process was smooth and seamless, virtually stress free! Further, Mary Ann continues to contact us from time to time to check up on us and make sure things are going well for us. When the time comes, there is no doubt... Mary Ann will be selling our house and helping us get into our next! Update: She SOLD our home and we used her to BUY another in June 2015! Adam and Kristina Capps
We had a wonderful home buying experience with Mary Ann. This was our first home, and she made the process easy and enjoyable. She really got to know us and found houses that fit our profile. She made every step of the process clear and easy to understand. Not only do we have a house we love, we had a great time getting here and made a friend along the way. Mary Ann made our experience FUN! We absolutely recommend her to anyone! Andy and Sara Heinicke
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