FICO stands for Fair Issac and Company; they are a credit agency many lenders use when reviewing your credit. If you have a poor credit rating, these are the people that have designated it as poor.
Fair Issac and Company are not required by law to disclose how they calculate your FICO score; however, you can be sure the contents of your credit reports weigh heavily on the calculation.
Your FICO Score Explained:
The FICO Score system is fairly straightforward. The higher FICO score you have the better. You will be able to qualify for higher loan amounts, better terms and conditions, and better interest rates.
If your FICO score is lower than 500 your options for a mortgage loan are limited. There are subprime mortgage lenders that specialize in bad credit mortgages; however, you will pay a premium for their services.
If your FICO score is 500-600 you will be able to find competitive financing; however, you may be required to pay points up from in order to qualify. Points are prepaid interest that you must pay when required, at closing. A “point” is 1% of the total loan amount financed. This is not a payment on the loan balance, in many cases this is an up-front fee your lender is requiring for you to qualify.
If you have a FICO score of 640-700 your chances of finding a mortgage with great interest rates and conditions improves dramatically. Your FICO score becomes a bargaining chip you can use to negotiate for better terms and fewer fees.
If your FICO score is between 640-700 mortgage lenders will be falling over themselves for your business. You can qualify for 125 percent of your home value. Your FICO score is an excellent bargaining chip and you should not settle for a mortgage with any fees or penalties whatsoever.
Your FICO score is based on the information in your credit report and there are steps you can take to improve it. First, make sure your credit reports are accurate. These records are maintained by three separate companies and are prone to errors. Second, pay down the balances on your credit cards and close any accounts you do not need. Make sure you make all of your payments on time and do not carry large balances on your credit cards. Do not make any large purchases while shopping for a mortgage, and do not let lenders access your credit until you have selected the best mortgage for you. Too many credit inquires can damage your FICO score.
If your FICO score is low, don’t despair. This is just one aspect of your financial picture. The mortgage industry is extremely competitive and you will find a lender that is willing to work with you. You just need to do your homework to find that lender. A free mortgage guidebook can show you how.
Visit RefiAdvisor.com to sign up for your free mortgage guide today.
Albuquerque Mortgage Refinance
Louie Latour has twenty years of experience in the mortgage industry as a mortgage broker.
He is the owner of Mortgages Refinance Advisor, a mortgage help site devoted to saving homeowners money with a free guidebook “Mortgage Refinance: What You Need to Know.”
Sign up for your free guide today at: http://www.refiadvisor.com
