CREDIT SCORES and FICO FOR BEGINNERS.

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What’s the purpose of Credit Scores (FICO)?

To provide a Lender with an independent opinion on the probability that a possible Borrower will pay a Loan as agreed.

How is the score determined?

By looking at the history of payments on previous debts and developing a numerical SCORE which reflects that history. For example:

A score of 800 or more is EXCELLENT. Lenders compete for your business.

A score between 700 and 799 is GOOD. No major problem getting a Loan.

A score between 640 and 699 is POOR. Will pay higher interest rate for a loan.

A score below 640 is BAD. Very difficult to get a Mortgage at an acceptable rate.

NOTE. These examples relate to Mortgages. Other types of Lenders will have different score standards

What exactly is FICO?

The Credit scoring system developed by the Fair Isaac Co and used by the 3 major Credit Bureaus, EXPERIAN, EQUIFAX, and TRANS UNION. Each of these interprets the data slightly differently so produces a slightly different score.

What is MOST important in producing the score?

35% is Payment History. (Do you pay on-time, any Bankruptcies, foreclosures, debt Judgments etc?)

30% is Amount Owed. (Total amount owed as a percentage of credit available.)

15% is Length of Credit History. (Old debts are better than new debts.)

10% is New Credit. (Too much is a Negative.)

10% is Type of Credit. (Credit Cards, Store Cards, Mortgages etc.)

Where can I learn more?

www.MyFico.com is the Public information site for the Fair Isaac Company.

BEWARE of Credit Repair/fixing SCAMS. Anyone who wants money up front should is probably a SCAM.

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