Understanding FICO Scores

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In the mortgage lending world, FICO (Fair Isaac) scores either make you or break you when it comes to obtaining a loan or getting the best rate you can. This is the "mortgage scoring" system used to get a conventional mortgage.

FICO scores are numbers calculated based upon your credit history. The better your credit, the higher your number or score will be - the worse your credit, the lower the score. In some instances, lack of credit result in "no score" on your report requiring you to provide "alternative credit" via your rental, utility or telephone payment histories.

There are some lenders that do not use this manner of scoring to the degree that most do. If your score falls in the lower ranges, even if only due to inaccuracies in your credit report, you may need to find one of the lenders that do not heavily emphasize your FICO score. Talk with your mortgage broker or lender to understand what your options are!

FICO scores were created to "simplify" the mortgage lending industry. However, many brokers and lenders feel this manner of scoring creates more problems.

To give you a general idea, we have included the scoring portion of a "sample" credit report. You will not only notice the scores, but also the four main factors which lowered the score. The following table shows the factors that can bring the score down, and gives some points on which to focus to bring it up!

***** BORROWER: DOE, JOHN M. *****

TU: [00627] Reason1=[022] Reason2=[016] Reason3=[028] Reason4=[004]

TRW: [00631] Reason1=[022] Reason2=[016] Reason3=[028] Reason4=[032]

EQUIFAX: [00619] Reason1=[022] Reason2=[016] Reason3=[028] Reason4=[032]

Reason	TRW	TU	EQUIFAX
Amount owed on accounts is too high	1	1	1
Delinquency on Accounts	2	2	2
Too few bank revolving accounts	3	N/A	3
Too many bank or nat'l revolving accounts	4	N/A	4
Too many accounts with balances	5	5	5
Consumer finance accounts	6	6	6
Account payment history too new to rate	7	7	7
Too many recent inquiries last 12 months	8	8	8
Too many accounts opened in last 12 months	9	9	9
Proportion of balances to credit limit too high	10	10	10
Amount owed on revolving accounts is too high	11	11	11
Length of revolving credit history is too short	12	12	12
Time since delinquent is too recent or unknown	13	13	13
Length of credit history is too short	14	14	14
Lack of recent bank revolving information	15	15	15
Lack of recent revolving account information	16	16	16
No recent non-mortgage balance information	17	17	17
Number of accounts with delinquency	18	18	18
Too few accounts currently paid as agreed	19	27	19
Time since derogatory public record or collection	20	20	20
Amount past due on accounts	21	21	21
Serious delinquent or derogatory. public record or collection	22	22	22
Too many bank or national revolving accts w/ balances	N/A	N/A	23
No recent revolving balances	24	24	24
Proportion of loan balance to loan amt too high	33	3	33
Lack of recent installment loan information	32	4	32
Date of last inquiry too recent	N/A	19	N/A
Time since last account opening too short	30	30	30
Number of revolving accounts	26	N/A	26
Number of bank revolving or revolving accounts	N/A	26	N/A
Number of established accounts	28	28	28
No recent bankcard balances	N/A	29	N/A
Too few accounts with recent payment information	31	N/A	31

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