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185 Wythe Avenue Suite 94 – Brooklyn, NY 11249 · Tel: 212-228-2215 – Fax: 516-203-4538
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What Goes Into Your Fico Score

Updated: Apr 1, 2019

Running a credit report is a necessary part of the approval process when you apply for a home loan, as it provides important information such as your payment history, total amount owed, and monthly revolving debt. Each of these things will help us during the underwriting process and reaching a final credit decision.


FICO Score


Your FICO score is another significant part of your credit report.  FICO (Fair Isaac Corporation), was named after the company that first introduced the FICO scoring method in 1956.  This method analyzes the five categories listed below and assigns a number ranging between 300 and 850.  The higher your FICO score, the better your overall credit ranking.  FICO analyzes your specific data with the following average weightings in order to calculate your FICO score:    


Payment History--35%  Considers how you've handled credit cards, installment loans, finance company accounts, mortgages, retail accounts, etc.  FICO also looks into public records such as bankruptcy, collections, and wage attachments.  If you have payment delinquencies, they want to know how much, how many, and how long ago they occurred.


Amounts Owed--30%  Looks at what you owe, what types of accounts you have, and how many.  Also considers what percentage of your credit line your balances typically use and the percent of the principal still owed on installment loans.


Length of Credit History--15%  Takes into account how long the account has been opened, its specific type, and account activity.


New Credit--10%  Looks at recent credit inquiries and the number and proportion of recently opened accounts.  Also, the time since account openings and credit inquiries to see if this is a re-establishment of positive credit history following past payment problems?


Types of Credit Used--10%  Recent information on and the number of the various types of accounts you use -- credit cards, installment loans, mortgages, retail accounts, consumer finance accounts, etc.

Data from three independent credit repositories (Equifax, Transunion, and Experian) will be provided when we run your credit report.  Each repository will provide its own unique FICO score.  Of the three scores we receive, we will use your middle FICO score, or “mid FICO score,” as the baseline score to be used for qualification purposes and any interest rate adjustments.  For example, if your three FICO scores are 730, 745, and 750, your mid FICO score would be 745.  The lowest mid FICO score would be used if there is more than one borrower.  For example, if your mid FICO score is 745 and the mid FICO score of your co-borrower is 730, we would use 730.


Conclusion


There are two reasons your FICO score is important. First, it assists lenders to determine whether you qualify for a new home loan, and, second, it can affect your interest rate.  In general, if you have a higher FICO score, you will typically qualify for a lower interest rate.  


If you would like us to review your personal credit report or have any questions, please don’t hesitate to contact us.  We can usually help you improve your credit score which will make it easier to qualify for a home loan and/or help you obtain better overall loan terms.


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