HOW IS YOUR CREDIT
RATED?
Understand Your FICO Score To Win The Mortgage Game
Credit scoring has been part of the loan underwriting process for over a
decade now. Fair Isaac and Co. (FICO) developed the concept of credit scores
and the formula used to determine them. Basically, the score is a snapshot
of a person's credit picture at a particular point in time. FICO scores
are used by U.S. lenders to make millions of credit decisions each year,
including more than 75% of mortgage loan originations.
Here are the factors looked at in computing your credit score:
- Payment history.
FICO first looks
at how you pay off your debts. This information accounts for 35% of
the credit score, including:
- Presence of adverse
public records (bankruptcy, judgments, suits, liens, wage attachments,
etc.), collection items, and/or delinquency (past due items).
- Amount and severity
of delinquency (how long past due).
- Number of past-due
items on file.
- Number of accounts
paid as agreed.
- Amount of credit
owing.
Outstanding debt
is considered for about 30% of the credit:
- Amount owing
on specific types of accounts .
- Number of accounts
with balances
- Proportion of
credit lines used, as well as installment loan amounts (including
proportion of balances to total credit limits on certain types of
revolving accounts and proportion of balance to original loan amount
on certain types of installment loans).
- Length of time
credit established.
How long you've
actually had credit makes up about 15% of your credit score.
- New credit.
This accounts for
about 10% of your score:
- Number of recently
opened accounts, and proportion of accounts that are recently opened,
by type of account.
- Number of recent
credit inquiries.
- Types of credit
established.
Finally, FICO considers
the type of credit you hold, which accounts for about 10% of your credit
score. Number of (presence, prevalence, and recent information on) various
types of accounts, including:
- Credit cards.
- Retail accounts.
- Installment loans.
- Mortgage(s)
- Consumer finance
accounts.
|
|
Real Hotline is a one-stop property information service for home buyers. With a single e-mail, Real Hotline allows you to get all the information you need on all the properties you want, regardless of which real estate company listed or advertised the homes for sale.
