What’s In a FICO Score
Posted at 1:21 am | Filed Under mortgage-financing-tips.info
When you’re applying for credit whether it’s a credit card, a car loan, a personal loan or a mortgage lenders will want to know your FICO score. FICO is an acronym that stands for “Fair Isaac Credit Organization” and has become the main “measuring stick” mortgage companies use to predict whether or not someone is a good credit risk. FICO scores range from 300 to 850 and, unlike in the game of golf, a low score is not good.
Here are some general rules regarding FICO scores. If your score is below 500, mortgage companies consider you a poor credit risk, and you will not be approved for a mortgage. On the other hand, if your score is 700 or above . . . well, just tell us how much money you want and we’ll drop it off on your door step the next day! Just kidding, but you get the picture. A score between 500 and 619 tends to put you in what we term a “sub-prime” category, which means you will pay a higher interest rate if your loan is approved. Scores between 620 and 699 are weighed along with a variety of other factors in determining whether your loan will be approved and what interest rate you will receive. Again, the higher the score, the better.
If I’ve got you wondering, “What’s my FICO score?”, you can do one of two things. You can go to www.annualfreecreditreport.com and retrieve a free copy of your credit report from all three Credit Reporting Agencies: TransUnion, Equifax, and Experion. I always sugest paying to get the credit scores so you have a rough ideas of where you stand; unfortunately with the free service, they will not provide you with credit scores; thank the government for that.
Once you receive it, I will review it with you to ensure everything is as it should be and recommend changes that could increase your score. The other way to get your score is to go to www.myfico.com and purchase one of the services they offer, which range in price from $14.95 for one bureau report to $44.85 for all three. You should be aware that some businesses
will sell or give you credit scores that are not FICO scores and may also give you credit management advice that does not apply to FICO scores and could actually hurt your credit standing with lenders.
How Does FICO Determine Your Score? In taking a closer look, we get an understanding with this breakdown from the experts who understand credit scoring and how various choices you make impact your score…..
35% of your score is derived from payment history. Pay your bills on time and avoid judgments, collections and tax liens and you’ll be OK. The longer you pay your bills on time, the less your credit score will be affected. If you are late, however, the score takes into consideration how late (i.e., 30, 60, 90 days past the due date), how much was owed, how recently the late pay(s) occurred and how many there were. A 90-day late payment is not as risky as a 30-day late payment, in and of itself. Recency and frequency count too. A 30-day late payment made just one month ago will affect your score more than a 90-day late payment from five years ago.
30% of your score is derived from balances carried on accounts. The lower your balances the better. Revolving credit card debt is the most significant factor in this area. Scores are significantly reduced if your revolving credit balance is close to or at your credit limit. The scoring model considers you to be “maxed out” when this happens. One of the easiest ways to increase you FICO score, if you find yourself “maxed out”, is to ask the credit card company to increase your credit limit, and if possible, to do it without pulling your credit. Pulling your credit will create a credit inquiry, which we will talk about later. If at all possible, keep your balances below 45% of your available credit limit.
Be aware that some credit card companies, Capitol One for example, withhold or fail to report your credit limit. When this happens, the scoring system typically substitutes your highest reported balance on the card for your missing limit. That in turn will often depress your score because it will appear you are “maxed out” when in fact you may be nowhere near your credit limit.
15% of your score is derived from the average length of time you have had credit. The longer the amount of time, the better. So if at all possible, never close a credit card account . . . just stop using it if you no longer have a need for it. Being added as an “authorized user” to someone’s older credit card account will help a lot also. The card should be at least seven years old to make a decent impact in this area.
10% of the score is derived from the mixture of credit you have on your credit report. To maximize your score in this area, FICO would ideally like to see on your record a mortgage, a car loan and a few credit cards. The “magic” number of credit cards to have is three, but it is never a good idea to close credit cards to get down to that number because closing cards does more damage than the benefit received by having fewer cards.
And finally, 10% of your score is derived from the number of times you apply for credit because each time you do so, you generate a credit inquiry , which, as stated, can work against you. The number of your accounts that are new is also an important factor. Inquiries remain on your credit report for two years, although FICO scores only consider inquiries from the last 12 months. Important to note is that all mortgage inquiries made within a 45-day period are treated as one credit inquiry no matter how many times your credit is pulled for that purpose.
Douglas Boncosky is a Licensed Mortgage Planner with Smart Mortgage Access in Schaumburg, IL. Doug has written a number of articles about mortgage related financing including his popular book titled “First Time Home Buyers Guide to a Stress Free Home Buying Process” Doug also writes a series of business improvement articles to help his marketing partners grow their business. Doug can be reached at http://www.dougboncosky.com
Tags: credit repair, credit score, improving credit, mortgage financing, refinanceCan You Get a No Down Payment Mortgage with Bad Credit
Posted at 1:04 am | Filed Under mortgage-financing-tips.info
Saving up money for a down payment can seem impossible, especially if you have credit issues that you are trying to clear up. Fortunately, there are lenders who are willing to give you a bad credit mortgage that requires no down payment.
No Down Payment Mortgage Loans
There are essentially two types of mortgage loans that you can get with no down payment. The first is a 100 percent mortgage loan. This loan is preferable, because it provides you with 100 percent of the financing that you need to purchase a home. The second type of loan is an 80/20 mortgage that finances your purchase with two loans. An 80/20 loan is much more common and is typically easier to obtain than 100 percent financing.
Qualifying for No Down Payment Mortgage Loans
If you have bad credit, you will increase you chances of approval by dealing with a lender that specializes in bad credit mortgages. These lenders are experienced in obtaining financing for people who have credit problems. They will be easier to work with and will offer you rates that other lenders may not be willing to provide.
When it comes to no down payment mortgage loans, each lender will have their own criteria for determining which type of loan you qualify for. With 100 percent financing, most lenders require a credit score of 600 or higher. If you choose 80/20 financing, you can usually qualify with a credit score of 560. To find a no down payment mortgage loan, try using a recommended lender of www.abcloanguide.com.
Applying for No Down Payment Mortgage Loans
Before applying for a mortgage loan, you should check your credit report to determine what your credit score is. If your score is lower than you thought it would be, you can try to raise it. You can also dispute any errors or old negatives that you find on the report. Mistakes can sometimes happen. Clearing them up before you apply for a no down payment mortgage loan will give you more financing options.
See ABC Loan Guide’s list of lenders for Buying a Home with No Money Down, along with a list of reliable Mortgage Lenders for Poor Credit.
Tags: 100 percent financing, credit repair, Mortgage Loans, no down payment, online mortgage lendersDo You Have Credibility Good Credit Can Help You With Getting The Best Mortgage Interest Rate
Posted at 4:07 am | Filed Under mortgage-financing-tips.info
Getting the best mortgage interest rate available can be a daunting task. Part of that is shopping around and getting quotes, both online and off, from various mortgage companies. But, no matter how many mortgage quotes you get, you will not get as good a rate if you do not have good credit. All of the lenders and mortgage brokers you speak to will want to know your credit history, and getting the best mortgage interest rate relies in good measure on how good your credit is.
Why lenders care about your credit history
Giving you a home loan is a big risk. That’s a lot of money for lenders to fork out. And, mortgage lending is part of a business. It’s not just the money they give you that lenders want back; they want to make money from the interest payments you make. This is where credit comes in. Lenders check your credit to see how big of a risk you are. They want to know how likely you are to default on the home loan, leaving them scrambling to find a way to recoup some of their losses. If you have a good credit history, you are less likely to default, and they will offer you a lower mortgage interest rate, knowing you will probably pay the entire amount back. Bad credit means they charge higher interest rates, meaning you make higher payments, ensuring that they get as much money back as possible before default.
Things you can do to improve your credit score
Getting the best mortgage interest rate possible can be done if you take steps to improve your credit score and strive for a good credit history. Here are some things you can do:
Tags: credit repair, credit report, credit score