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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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Rhonda Montgomery Real Estate, LLC
4218 Veterans Blvd Del Rio, TX 78840
Office Phone: (830) 775-3704

Rhonda Montgomery, Broker/Owner
Cell: 830.313.0106
Rhonda@RMontgomeryRealEstate.com
Texas Real Estate Commission Information About Brokerage Services

Dawn Clayton, REALTOR
Cell: 830-719-5479
Dawn@RMontgomeryRealEstate.com
Texas Real Estate Commission Information About Brokerage Services

Cesha Hernandez, REALTOR
Cell: 830-719-3950
Cesha@RMontgomeryRealEstate.com
Texas Real Estate Commission Information About Brokerage Services

Amanda Stanford, REALTOR
Cell: 512-587-3017
Amanda@RMontgomeryRealEstate.com
Texas Real Estate Commission Information About Brokerage Services

Tony McDonald, REALTOR
Cell: 830-734-5352
Tony@RMontgomeryRealEstate.com
Texas Real Estate Commission Information About Brokerage Services

Marie Pereles, REALTOR
Cell: 830.734.1721
Marie@RMontgomeryRealEstate.com
Texas Real Estate Commission Information About Brokerage Services

Jana Crane, REALTOR
Cell: 830.703.6357
Jana@RMontgomeryRealEstate.com
Texas Real Estate Commission Information About Brokerage Services

Mary Smith, REALTOR
Cell: 830.734.7206
Mary@RMontgomeryRealEstate.com
Texas Real Estate Commission Information About Brokerage Services

Reyna I. Diaz, REALTOR
Cell: 830.719.3404
Reyna@RMontgomeryRealEstate.com
Texas Real Estate Commission Information About Brokerage Services

Christina Santos, REALTOR
Cell: 830.765.6086
Christina@RMontgomeryRealEstate.com
Texas Real Estate Commission Information About Brokerage Services

 

Gabriel Santos, REALTOR
Cell: 830.734.0198
Gabriel@RMontgomeryRealEstate.com
Texas Real Estate Commission Information About Brokerage Services

 

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