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What does a FICO score consider?

When dealing with a mortgage professional one of the first things that is discussed is your FICO score. Document type, loan amount, style of property, loan to value and occupancy are all items that will come in to play during the course of the transaction, but it is the FICO score that is the launching pad for the process.

There are five main categories of information that are given consideration when the score is calculated by the computer. Some of these items are more important that others but it is important to note that a credit history is constantly in flux and that no one item dictates your score. Yes it is fact that a delinquent payment will have a negative impact on your score but there are also factors every month that contribute to your score increasing. All of these items play off of each other and in the end a FICO score is generally a pretty accurate assessment of a particular borrower.

The main elements that are factored in to the score include your payment history, the amount you owe, the length of credit history, new credit and inquiries. Sometimes people who have lived their whole lives not borrowing money feel that they are doing themselves a favor, but in actuality in order to have a good credit rating you need to have a certain amount of loans open for a certain time frame and they need to have been paid on time. There are no quick fixes to a nonexistent or low credit score. Common sense and persistence will pay off in the end.

Lastly, the harsh realities of finance are all built on established business models. When discussing your loan with your mortgage professional it is easy to fall into a state of denial about your credit score. The fact remains that in the end the people who established these guidelines have done so because they work. A 700 scoring customer generally pays their bills better than a 650 scoring customer and so on. The key is to realize that different programs have different levels of risk and along with that comes different interest rates. That is the reason a 700 scoring customer will generally have a better interest rate than a borrower with a 650.

If you wish to discuss these and other items regarding credit, in more detail, please do not hesitate to call.

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