Fico Score - A FICO score is a number that rates a borrowers credit record. The score is based on a number of factors, including how well debts have been paid off, current levels of debt, types of credit, and length of credit history. Scores generally range from 350 to 900.

Credit scoring has been utilized by lenders for over 30 years. Credit scoring is a technology used by credit grantors to qualify the risk associated with extending credit to a given borrower. Risk is quantified by means of a score card which calculates a numeric value, or score, for a credit applicant a lender wants to evaluate. Score calculation is done based on information that has been determined to be indicative of future credit performance. There are many types of scoring methods currently utilized today including credit scoring, applicant scoring, behavioral scoring and several others. The type most relevant to the mortgage industry is credit scoring and among the most widely recognized is the FICO SCORE.

You should periodically review your FICO score and see if there is anything you can do to improve your score.

The are five main categories of information that the FICO score evaluates:

1. Credit Payment History: 35%
2. Credit Balances: 30%
3. Credit History: 15%
4. Credit Inquiries: 10%
5. Credit Types: 10%

Credit Payment History: 35%
At 35% Credit Payment History weighs the most. While events such as a bankruptcy, foreclosure or tax liens will have the greatest negative impact on your score, multiple and/or recent late payments have a tremendous impact as well.

Credit Balances: 30%
What is your credit balance to your credit limit? The Outstanding Credit Balance ratio has the second highest weight on your credit score. High balances on your credit cards can be viewed as a red flag since it’s an indication that you may be overextended. If you have multiple credit cards, you may want to spread the wealth to keep the credit balances to credit limit ratio low.

Credit History: 15%
Credit History is a reflection the length of time that you’ve had accounts open. You’re rewarded for keeping long term debt. Older credit accounts that have been used more frequently will have more weight than those that are newly opened or used with less frequency.

Credit Inquiries: 10%
Opening a new credit account doesn’t harm your credit score dramatically especially after you make the first payment. However, credit inquiries can negatively impact your score. Generating many credit inquiries exudes that you are trying to secure a large amount of credit or you are being turned down by lenders and have to apply elsewhere.

Credit Types: 10%
This percentage of your FICO score is based on your mix of credit. Do you have a good mix of credit cards, retail accounts, installment loans, finance company accounts or mortgage loans? It looks at the whole picture and totals how much of each type of account that you have.

The Fair, Isaac Corporation,(FICO) developed the formula for credit scoring. In general, the higher the score, the more creditworthy a borrower is in the eyes of the lender. A score of at least 680 indicates the borrower is very creditworthy.

FICO score is one scoring system used by Experian, a credit profiling company. Two other companies have similar scoring systems that are just as widely accepted by lending banks. Together with Experian's FICO score, credit reports that contain TransUnion's Empirica score and Equifax's Beacon score are often referred to as the Tri-Merge Report.

To keep a healthy or high FICO score you will need to at the very least do these 3 things:

1 - Keep your balances on your credit cards to 50% of what your limit is
2 - Always pay your bils on time - if you have to hold a bill and pay late make sure it's not more than 30 days to post. 30 day lates really bring your credit scores down
3 - Try not to cancel cards you have had for a long time. Length of time on accounts plays a part into the scoring

For more information on how credit scores are developed, please visit:

Fair, Isaac and Company (FICO)
www.fairisaac.com

200 Smith Ranch Road
San Rafael, CA 94903
ph: (415) 472-2211

There are many credit fixing agencies that will help raise fico scores for a potential borrower so they can put themselves in an overall better position for obtaining a loan. If your fico scores are low, there are still plenty of things that can be done to help bring scores up. Sometimes it takes little time and sometimes it takes longer but in the end the results can be fantastic.

Most lending institutions categorize scores in to ranges. Generally scores above 800 are considered excellent, scores from 700-799 are considered good, scores from 600-699 are average, scores from 500-599 are considered poor, for scores below 500 there are very few lending options available. There are many lenders and each has their own guidelines for qualifying borrowers.

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