Your credit score, (also known as your FICO score) is extremely important. Your credit score determines what you can or cannot purchase and how much it will cost you. For example, you qualify for a home loan but your qualifying interest rate is through the roof. This is because your FICO score from Experian, TransUnion, and Equifax suggest that your rate should be higher due to poor credit history.
Wait did you check you FICO score before applying for that home loan? This should be the first step before applying for a loan. The second step is to order your credit report from the three credit reporting agencies. Your FICO (Fair Isaac Corporation) score determines the amount of interest that you would pay on a particular loan. It is safe to say that you need to know your FICO score and determining factors that makeup your credit score to make sound financial decisions.
The factors that make up your FICO score are paying your bills on time, how much you owe, types of credit, and the number of new credit applications a person has applied for. Obviously paying your bills on time is very important. No lender wants to lend their money to someone who is unable to pay their bills on time. How much you owe is factored against how much you make. If you make $50,000 a year and you are $30,000 in debt, then this will hurt your credit score. The types of credit are also critical when your credit score is determined. Secured credit cards and home loans are definitely better than unsecured credit cards and other types of credit of this nature. Lastly, the amount of new credit applications can cause harm to your FICO score. When you apply for so much new credit, a lender may see this as sign that you may be going through financial hardships and thus acquiring credit to help the situation.
Let me share one of my experiences with you. Eight years ago I had a somewhat of a decent credit score between 670-690, yet I was being denied credit. I could not figure out what was going on. After doing some research I found out my problem. Although I paid a collection bill about 10 months earlier the damage was done. The account reflected as paid but it was recent and it affected my credit score tremendously.
The best remedy for a better FICO/credit score is consistency. Paying your bills on time will raise your credit/FICO score. It makes a world of difference between buying and renting a home. An example of this is two people applying for a 30yr mortgage. A person with a FICO score of 600 will have an average interest rate of 9.422%. Another person with an FICO score of 750 will get an average rate of 6.195% on a 30yr mortgage loan. That is close to $300.00 a month difference on a $216,000 loan.
From my experience in selling homes and buying homes for my clients, in today's market you would benefit immensely from having a FICO score as high as possible. It could be the difference of calling yourself a homeowner or a renter.
Please respond if you have any questions or comments or other helpful information that I may include with this topic.
For more information, visit the websites below.
http://www.myfico.com/
http://www.freecreditreport.com/
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/ - York, PA
Valueable info. Although a good fico is important, I think it is important you give consumers more detailed info. Specifically, FHA. On an average, I am getting my customers a 7% rate. with around a 600 FICO.
Also, depending on the bank, FICO is not your only determiner I recently interviewed a gentleman with a 701 mid score. Nice huh? You would think he could march down to the bank and demand rates. NOPE..
That pesky FORCLOSURE killed him. six years ago and paid! Oh, he got a loan. But no where near 6.1%.
Point is, banks look at the whole picture on an application or credit model. I advice you tell your customers not only to rely on score but also sit down with a professional to iron out the "details" before they expect a low rate. It avoids or lessens surprise and disappointment.
Oct 10, 2007 10:58 PM
Anonymous
Jeff, you're right FHA is the way to go today. The Subprime fallout has everyone saying the sky is falling when in fact it isn't. With no Fico score to worry about and if you are a person who was foreclose on three years prior you are eligible for a FHA loan. It is definitley the route I take today when buyers become concern about financing, and the look they give you when they learn different.
Oct 11, 2007 03:45 AM
#3
Landmark Real Estate - Manhattan, KS
Realtor, e-PRO, ABR, CRS, Manhattan Kansas Real Es
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