Apply for a mortgage loan and you'll soon become familiar with
FICO scores. Here's a primer on the infamous FICO scoring
FICO scores are merely a mathematical representation of your
credit record. Credit records are simply a recording of your
debts and assets. Credit card balances, for instance, are a debt
that appears on your credit record, as do late payments, bounced
checks and so on. Credit, of course, is a huge consideration in
the mortgage loan process.
A "credit score" is a figure that represents an overall
valuation of how you handle credit and the risk level associated
with giving you more credit, to wit, a mortgage loan. The loan
underwriter will review your credit report for items such as
payment history on debts, debt balances and types of credit you
already have. A summary of this information is represented by a
figure known as you "FICO score."
You may be surprised to learn that "FICO" doesn't stand for any
credit-related terms. Instead, it stands for Fair, Isaac and
Company. This company developed the mathematical formula that
produces the much loved or hated FICO scores. The FICO score
assigned to you determines whether you love or hate the formula.
FICO scores come in a range of three digit numbers. The lowest
FICO score you can get is 350. The highest FICO score is 850, a
score for which bankers will bow at your feet. The higher your
score, the better your credit situation and the more likely a
bank is to provide you with a mortgage loan.
Most people do not have perfect credit. To this end, we find
most people have FICO scores ranging from the low 600s to the
high 700s. Mortgage applications typically are not rejected
because of a few late payments.
If you're considering purchasing a house, you should always try
to pre-qualify for a mortgage loan. Getting a reading of your
FICO score should be one of the first steps.
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