Understanding Your FICO Score

When applying for a mortgage loan at the Lake of the Ozarks, the lender needs to determine how likely it is that you will make your payments. How does a lender do this? The FICO Score is the credit score most lenders use to determine your credit risk. In today's blog, your Lake of the Ozarks mortgage lender helps you understand what this number means.

What is a FICO Score? 

FICO Scores are the most widely used credit scores. They are a type of credit score created by the Fair Isaac Corporation. The Fair Isaac Corporation is a company specializing in "predictive analytics," meaning they take information and analyze it to predict what's likely to happen. While they do create credit scores, FICO itself is not a credit reporting agency. They use information provided by Equifax, Experian or TransUnion. The FICO Score, along with other details, is used to assess credit risk and help lenders determine whether or not to extend credit.

How is a FICO Score Determined? 

FICO Scores range from 300 to 850. In general, scores above 650 indicate good credit, while those below 620 indicate bad credit. The score takes into account information from 5 different areas, each weighed differently:

• Payment History - 35%
• Current Level of Indebtedness - 30%
• Types of Credit Used - 10%
• Length of Credit History - 15%
• New Credit Accounts - 10% 

The importance of any one of these factors is also determined by the overall information on your credit report. For example, if you haven't been using credit very long, your score will be factored differently than those with a longer credit history. 

Understanding a FICO Score

The first thing a mortgage lender at the Lake of the Ozarks wants to know is whether or not you've paid past credit accounts on time. Next important is how much you currently owe. However, having credit accounts and owing money on them doesn't necessarily mean you are a high-risk borrower. The length of your credit history also plays an important role in establishing your FICO Score. In general, a longer credit history will increase your FICO Score. Your credit history takes into account how long your credit accounts have been established, including the age of your oldest account, the age of your newest account and an average of all your accounts. Credit history also looks at how long specific accounts have been established and how long it's been since you used certain accounts. The next step is to look at what types of credit you have, including credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. New credit accounts will also come into play. Research shows that opening several credit card accounts in a short period of time represents greater risk. 

Your FICO Score is not only used to determine whether or not you'll be approved for a home loan at the Lake of the Ozarks, but also to determine what interest rate will be offered to you. If you are concerned about your FICO score and how it will affect your chances at a mortgage, talk to the best mortgage professional at the Lake of the Ozarks. I'm here to help you every step of the way, from your pre-approval all the way to closing on your dream home at the Lake! Give me a call at 573-746-7211.

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Michael Lasson

Senior Loan Officer

NMLS #: 493712

4655 B Osage Beach Parkway

Osage Beach, MO 65065

Direct:  (573) 746-7211

Cell: (573) 216-7258

Fax:(866) 397-0318

Email:  mlasson@fsbfinancial.com

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.