Here Fico, here boy!  

No wait - Fico isn't the family pooch,  FICO is something much bigger and something many of us don't understand, but are affected by daily.  Particularly those of us looking to buy a home or make any other financed purchase.  

Here's a brief overview of what FICO is and what it means to you.

FICO is just another credit score.  Your credit score is a number that summarizes your risk to anyone loaning to you, and FICO is just one of the corporations that calculates your credit risk.  It stands for Fair Isaac COrporation - FICO!   It's the most popular score used by lenders to determine your risk to them.   When a lender orders a FICO score, they can order it from any of the three agencies that maintain credit reports.  The FICO is calculated at that given time, based on the information on that agency's credit report right then.  

• Make sure you check your credit reports yearly for accuracy - it's free! 
• When YOU order your own score, make sure you're ordering a FICO so you see what the bank sees.  

FICO scores can range from 300 - 850! The higher the score, the lower the risk you are perceived to be to the lender.  This generally translates into better approvals and better rates and terms on financing.  A person with an awesome FICO is considered to have a great ability at maintaining their payments, credit, etc.  Someone with a much much lower score is seen to maybe not be ready for a checkbook much less a loan.  

Here's some of the big things that go into calculating your FICO score:

• Types of Credit you have (revolving, installments, etc)
• New Credit - including inquiries
• Length of overall Credit History
• Payment History - this is the biggest factor
• Amounts Owed  - this is the 2nd biggest factor

From these and their importance, you can obviously guess that the recommendations are:

• Have a mix of credit types to show your ability to handle various credit lines, but not too many! 
• Open credit you need, but don't open credit just for fun!  Keep inquiries to a minimum - when applying for loans, do your inquiries as close together as possible so they register as one product search and not as though you're opening 10 mortgages.  
• Obviously the longer you have a history the more data they have to calculate and the more time you've proven yourself.  This of course can only get better with time. 
• Pay on time, every time.   As late payments fade in time, they'll affect you less.  Set up automatic payments of at least the minimum on all your cards so that you are never late.   Your FICO will thank you. 
• The more you owe, the more overextended you look, the more risk that one thing going wrong will send you into financial disaster and the banks will lose all their money on you.  So basically,  try to keep your balances down to less than 30% of your limit.  

For more information about FICO and how it affects you, visit http://www.myfico.com/crediteducation



photo courtesy of Trinity Credit Services, creative commons license, Flickr.

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 For more information about getting ready to purchase a home,
drop me a line or call anytime!

Sheree Wilkerson

cell/txt 316.461.0575
sheree@rwwichita.com

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