FICO Scores, What Affects Them, How Lenders Look At Them

FICO stands for Fair Isaac & Company. TRW (Experian), Equifax, and Trans-Union- these three major credit bureaus reports about the credit scores. As the scores from the three bureaus do not match exactly, so the score comes in a range. The score range is from 300 to 900. Your FICO score depends on various factors like Length of your credit history Problem with repayment like late payments, missed payments, and underpayments Amount of available credit and how much you have used from it Your employment history How many credit cards you have Your loan history Your negative credit information (if any) How important are theyFICO scores are very important. They can decide and affect your financial future. When you go for mortgage shopping, then FICO score can help you or can lend you in problem. A good FICO score can help you in getting a good mortgage loan with lesser interest rate.  Now let’s see 3 different scenarios :  Scenario A: A score of 850  It will get you the lowest interest rate on your mortgage and low down payment. In such case, your interest rate does not have any point attached.  Scenario B: A credit score of 600 You get a good loan but with slightly higher mortgage rate. You may need to pay a point with your interest rate.  Scenario C: A credit score of 500  You will have to pay high interest rate with points attached to it. Your application may even be rejected by the lender.  Different lenders evaluate the same rate differently. So, your interest rate will vary accordingly. There are different options are available for each type of credit score holders. We will discuss about it later in the next post.