The news has been riddled lately with stories of the power of a positive credit score, and what you can do with it. But, since my job as real estate agent is helping folks buy homes, and as a Texas Affordable Housing Specialist supporting home ownership retention - I am going to give a quick refresher on what makes good FICO score, and how to get one.
What is FICO? - It is an acronym for Fair Isaac Corporation, and that Fair is not as "in plays fair with others" rather a engineer named Bill Fair, and Isaac a mathematician provided consulting services in decision management. They developed the FICO score to rank credit risk, which all 3 major US consumer reporting agencies adopted.
What makes up the score?
- 35% = Payment History
- 30% = Capacity
On-time payments or delinquencies. More emphasis is put on the most current pay history
By totaling your monthly loan payments, including credit cards, student loans, car loans and any other monthly payments. Do not include rent or mortgage. Then list your monthly income after taxes. Then, divide the total owed by the total earned. You are considered to be in debt danger zone at 25%. Consider reducing your debt level by cutting your spending and diverting those funds to your credit payments.
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