Your FICO Score
Have you wondered about what your FICO score is and how lenders use it to determine your ability to purchase a home?
FICO measures credit-worthiness. Underwriters use three credit bureaus, Equifax, Experian, and Trans Union, to determine your score in the following ways:
1. Delinquencies lower scores, and scores drop when several credit accounts are opened in a short period.
2. A long credit history is better than a new one, and too few revolving accounts makes it harder to evaluate the ability to manage credit. This one seems backwards, why would you want lots of accounts open? But what lenders want to see is that you can successfully manage your credit and hence pay your mortgage.
3. Consumers with “maxed out” cards may have trouble making payments. Too many revolving accounts indicate over-extension.
4. Tax liens, bankruptcies, and use of consumer credit agencies can all lower a FICO score. These are concerns but may not be deal breakers.
5. Small credit card balances and no late payments show responsibility.
There are ways to think about and manage your credit to put you on a good path toward home ownership.
There are many lending products now available for potential homeowners so it makes sense to call me to learn about your options.
Real Estate Broker and Attorney