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How Buyer Agents Save Money ->
Fair Isaac and Credit Scoring
Fair Isaac and Credit Scoring
Your creditworthiness for a mortgage is measured by
credit scores. The primary credit scoring model used is one developed by
the Fair Isaac Corporation. Your credit report and FICO scores are
becoming increasingly important in the mortgage qualifying process.
Borrowers need to be aware of this and do everything possible to protect
his/her credit.
Fair Isaac (FICO) scores vary from the low of around 300
to a high of around 850. A FICO score of 680 is considered good enough
to not require any further review by an underwriter. An "A" level loan
may still be made with a 630 FICO score if reviewed by an underwriter.
Why do mortgage lenders pay so much attention to these
scores? Statistics indicate that there is a 1 in 8 chance that a
borrower with a FICO score below 600 will be either severely delinquent
or in default of their loan. While there is a 1 in 1,300 chance that a
borrower with a score above 800 will have similar problems. It is
therefore easy to see that lenders will put a lot of reliance on such
credit evaluation systems.
So what can you do to get and keep a higher score?
• First, never have any late payments.
• Second, don't have a sudden surge of credit activity and credit
inquiries.
• Third, don't "tap out" your credit usage. Using more than 80% of a
credit line seems to negatively impact a credit score.
For additional information: Visit the
Fair Isaac Corporation
web site.
Credit Repositories:
There are several sources available for obtaining your credit reports
from one or more of the three credit repositories. Local lenders will
generally pull an "in-file" credit report for free. They will usually
combine reports from two or three of the credit repositories. There also
are various Internet on-line sources for combined reports in the $8 to
$12 range.
However, the best approach, in our opinion, is to obtain
individual reports directly from each of the three credit repositories.
If you are a married couple, we also recommend getting individual
reports and not combined as a couple.
All three credit repositories have Internet on-line
access. We have provided links to their web sites below. If there is
inaccurate information on any of the reports you can immediately deal
directly with each one separately to clear things up. With combined
reports it is sometimes very difficult to determine which credit
repository needs to be contacted.
Make sure that you "bookmark" this page so that you can
return to it in order to have access to the links for each of the three.
Equifax
Experian
Trans Union
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