YOUR CREDIT REPORT AND FICO SCORES
Your FICO score is one of the most important factors in your loan process. Here are some FICO Facts you should know about:
A Fico score is a standardized ranking generated by the three major credit reporting agencies, based on your credit history. To make the process fair for everyone involved, lenders use the the middle FICO score to determine which loans and rates you will qualify for.
Your FICO scores are composed of many pieces of data. This data can be grouped in 5 major categories along with percentages given. The FICO score takes into account all these 5 categories and not just one single category. The FICO scores only looks for what is in your credit score and your electronic file. It does not looks for outside factors which your lenders may take into consideration for granting a loan. Here is the break down of these categories along with percentages.
1. Payment history 35 percent weight
Account information on all you credit accounts including loans, credit cards, installment loans and bank loans.This category also contains information on adverse and negative credit history like bankruptcy, charge off, foreclosures etc. Payment history also includes how long the account is delinquent and how many payments made. This also contains how many accounts have been paid as agreed.
2. Amounts owed 30 percent weight
The amounts of all outstanding balances, credit balances and proportion of credit balances to the credit lines. The higher the ratio lesser the FICO scores. It also includes ratio of installment loans versus the original loan amounts.
3. Length of Credit Profile 15 percent
This category weighs in how long the credit profile has been open and how much credit has been awarded. The longer the length of credit profile and the credit account higher the weight on your FICO scores
4. Recent credit history 10 percent
This includes the new accounts opened and how many newer inquiries are made. The proportion of new credit accounts with the older accounts in general. The lesser the newer accounts better the Fico scores
5. Types of Credit Accounts 10 percent
This takes into account what type of credit account your profile carries. Types of credit includes credit cards, installment accounts, mortgage and loans. A mortgage account carries lot more weight and helps the fico scores.
An old established credit profile with few inquiries will have higher FICO score. The FICO score takes into account all the data described above, including the positive ane negative data. Duplicate accounts and other frivolous things will distort the FICO scores.
But we do know some things you can do and they may work. Simply put, the better your credit is, the higher your FICO score will be, and that translates into cheaper loans. Currently, a minimum score of 620 enables you to get an "A" grade loan, a score of at least 640 gets you stated income second loans, and with a score of 700 and above, you get the best rates.
Repeated inquiries can lower your fico scores and you may not qualify for the loan you need It is possible to correct errors in your credit report, though it does take time and effort on your part.
At Alliance Mortgage, we understand that your FICO score is only one of the many important factors used to determine which loans you will qualify for. Contact us today to find out how we can help you get the loan you want.