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What You Need to Know About The Importance of Credit
Your Move Matter. So does your credit rating. A credit rating or FICO score is one of the most critical pieces of customer information when applying for a mortgage.
What is a credit rating or FICO score? The Fair Isaac Company (FICO) combines credit information and predictive analytics to forecast customer behavior via a FICO score. FICO gathers information from the three main credit repositories which are Equifax, Experian and TransUnion. This rating determines which products and interest rates can be offered. A credit rating is based on a credit report which collects information on:
• Debt Payment history
• Amounts owed v. amount available
• Length of credit history
• Age of credit
• Types of credit
FICO scores range from 350 to 850. Higher FICO scores can result in greater financing options which makes managing a FICO score very important. The best financing options typically begin in the range of 720 – 760. However, programs exist through the Federal Housing Administration (FHA) for customers whose FICO scores are above 580. Here is an approximate range of how credit scores are judged by FICO:
• Excellent credit = 720 and above
• Good credit = 660 to 719
• Fair cr edit = 620 to 659
• Poor credit = 619 and below
In 2003, new legislation was implemented which allows customers to obtain one free credit report per year. Customers can receive a free copy of their credit report once per year from AnnualCreditReport.com, which provides the reports from all three companies.
Credit Report Management
Customers should review the report for errors and make corrections immediately. This is especially beneficial for customers seeking a loan.
Customers should know:
• Correct information can mean a better credit score
• Corrections can take time, for example, asking creditors for letters clarifying an error can delay the loan process.
• The credit agencies offer strategies and suggestions for increasing your credit score. i.e. keep balances low on credit cards
- Jan 27, 2020
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