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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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Ronda Campbell
Frisco, CO 80443
Phone: 970-389-3437
Email: ronda@colorado.net

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In the last 3 years, my wife and I have bought two properties using Ronda Campbell as our realtor. Ronda Campbell's excellent communication skills and knowledge of the Summit County real estate market was extremely helpful in guiding us through the selling and purchasing process. Ronda Campbell provided a professional and easy to work with demeanor and we will certainly only contact her again for any future real estate Transactions in Summit County Colorado. Gregory Louden
We would recommend Ronda to anyone looking to buy or sell their home in Summit County and the surrounding areas. Not only is Ronda knowledgeable of the market, she is also extremely responsive and has gone above and beyond expectations to help us buy or sell our homes and even saved us lots of money. Whether we were buying or selling, Ronda helped us each step of the way from listing, inspections, appraisals to smooth closings. She is very skilled in today’s technology and she made the entire process flow smoothly. Ronda is well connected to the Community and can provide great resources for anything you may need like repairs, cleaning, moving, storage and much more. We would recommend Ronda to anyone looking to have a great experience selling or buying their home. Jayne Esser
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