Archive for the ‘fico score’ Category

FICO Demystified

Tuesday, July 22nd, 2008

Your lender rattles off the term as if everyone knew exactly what FICO meant. But most of us don’t even know what the letters stand for.
The first part is simple: The Fair Isaac Corporation. Sounds mysterious, doesn’t it? What the heck is a Fair Isaac? Nothing. It just happens to be the names of the men who started the company.
In 1956, engineer Bill fair and Mathematician Earl Isaac joined forces to create what was originally a consulting and decision management service. Then in 1981 they devised a system for scoring the amount of risk associated with making certain loans and investments, and the FICO score was born.
The score is generated by statistically analyzing an individual’s credit history. Among other things, this scoring system takes into account:
· Bill paying history
· Debt to income ratio
· Debt to available credit ratio
· Length of time a person has had and used credit
· Existence of bank accounts
· Number of recent credit inquiries
Each factor in your financial makeup is given a “weight” toward your final score, which is a calculated risk factor, based on the past performance of others whose financial history is similar to yours. Through this score, lenders are shown the statistical likelihood that you will pay your debts. Then they determine under what conditions and at what rate of interest they will lend to you.
If your score is 720 or higher, you’ll have an easy time getting a loan. If your score is under 600, you’ll be considered a poor risk and if you can get a loan, it will be at a higher rate of interest.
FICO has become a giant in the American world of finance. In addition to providing credit scoring, FICO provides consulting and management services to over 200 international retailers, 99 of the top 100 U.S. banks, and over 100 international telecommunications companies.
Headquartered in Minneapolis, Minnesota, FICO has offices on 5 continents, employs over 3,500 people, and turns a revenue of over $800 Million every year. FICO is not associated with the government, but like Equifax, Experian, and TransUnion, is a publicly traded company.
You should always be aware of your credit score, so that you can make adjustments and take steps to keep it high. You can buy the report directly from FICO, or you can take advantage of a credit report offer from one of many online providers.

Low Credit Score mortgage loans.

Sunday, July 20th, 2008

With all the drama in the lending industry, you can still get a mortgage with low credit scores. Yes, credit scores are a big determining factor in whether you will get approved for a mortgage, but your credit scores don’t have to be all that great. The mortgage loan I am talking about is a FHA loan. FHA loans are loans that are insured by the government. For years FHA did not have a credit score requirement, and until now they require a minimum of a 300 credit score. This may sound crazy but that is the lowest credit score they will finance with all the new mortgage insurance guidelines. Nether less, typically when you have credit scores that low you have too many recent issues to get a lender to approve you anyways.

There is a market on Wall Street called the secondary market which the buying of mortgage paper takes place. Typically this paper is sold in bulk called mortgage backed securities. The investors that buy this paper may have their own internal restrictions before buying loans. These restrictions might be far stricter than what FHA requires to insure a FHA mortgage loan.

Currently in today’s market there is a minimum credit score requirement of 580. There is also changes going on within banks where they are requiring a middle credit score of 620. The reason for this requirement is because people who have bought homes below that credit score threshold have a history of foreclosing on their homes. So the investors tighten up on what type of FHA mortgage paper they will buy.

Regardless of whether the credit score requirement is 580 or 620, those types of credit scores are still considered low and a high credit risk according the Fair Isaac’s scoring model. So yes you can still currently get a mortgage down to a middle credit score of 580. You will pay higher interest rates with that score, but you will get a 30 yr fixed mortgage.

I only have one Credit Score on my Credit Report Q & A

Saturday, July 19th, 2008

Hi mike,
I have a question about why I only have one credit score. I recently pulled a copy of my free credit score report through your site, and only got one score back from Equifax. I thought you got three credit scores. I don’t have any credit cards and any outstanding loans currently. I do have past history but it has been years. I decided a while back to pay cash for everything. I thought you would have credit scores from past history.

Angela Pickerall

Hi Angela,
We see this quite often. There could be several situations going on here. Without actually seeing your credit report I will gives some scenarios. The first problem I see is you don’t have any new or existing credit reporting. So the current credit scoring models don’t have anything to score you on. The current FICO scoring model likes to see the following to calculate your credit scores with each bureau.

• Payment History
• Amounts owed
• Length of credit history
• New credit
• Types of credit used

All of this goes into factoring your credit score with each credit bureau. Its looks like you are lacking all of this, and this is why you don’t have 3 credit scores. Yes one might be scoring you because a creditor is reporting to that bureau only. This is the second scenario. Some creditors only have contracts with certain credit bureaus. They may not have contracts to report information with all 3.

What is a good credit score?

Saturday, July 19th, 2008

You paid for your credit report on-line with your credit scores. You print it out, and the question is now what? Do you even know how to read or decipher what is on there? You might be asking yourself what is a good credit score, and do you have good enough credit to get the best terms and rates on any loan.

Every lender has its own criteria for lending someone money. Every insurance company, employer, credit card companies, and bank sets its own credit report and credit score standard. So what is a considered a good credit score by most standards.

Fair Isaac’s credit score model is like a standard amongst other credit score models. What does this mean? This means that there are other credit score models used to determine your risk, but most of them designed there credit scoring model after the FICO score model. FICO scores range between 300 (very bad) to 850 (very good).

About three years ago all the credit bureaus got together and came up with a credit scoring model called “Vantage Score.” These credit scores range between 501 to 990. But when it comes to credit scores the most widely used is the FICO score model.

As you can see there is a wide range of credit scores. You might be asking yourself what is considered good still. Well a good rule of thumb is to have at least a 680 credit score. There are 3 credit bureaus and each report there own credit score. Equifax, TransUnion and Experian are the three bureaus. Lets assume your Equifax credit score is 720, Experian is 660 and TransUnion is 680, your middle credit score is what most banks use. So you credit score used is 680. Usually with this type of credit score you can get approved for just about any loan. That does not mean you will get the best rates and terms though. If you are looking to get the best rate and terms you will need at least a 720 plus middle FICO score.

All loans are based on risk, and the credit scoring process is a mathematical solution to determine whether you will pay back the creditor or not. The lower your middle credit score the higher risk you are to all creditors concerned.

Remember some creditors have there own internal credit scoring process. So your credit score will not be the same with everyone. My advice would be to always pay your bills on time and keep your debt low. These are the two biggest factors in the credit scoring process.

Don’t be Led Astray by these Credit Scoring Myths

Friday, July 18th, 2008

Wrong information can be just as damaging as no information, and there’s a whole host of it surrounding the lending industry. Much of it involves credit scores.

Sadly, because many Mortgage lenders and bank representatives never take the time to actually learn about credit scoring, much of the bad information comes directly from sources you should be able to trust.

For instance, some will tell you that you should close open accounts. No! You should not. You definitely shouldn’t open any new accounts or even apply for new accounts when you’re trying to build your credit score, but if you close accounts you now have, you could actually lower your score.

This is because your debt load is measured against the credit you have available to you. When you close an account, that credit is not available, so your debt ratio goes up, making your account balances seem higher.

For instance, if you have 4 credit cards, each with a limit of $5,000, and you have balances of $3,000 and $4,500 on 2 of the cards, and zero balance on the other two, you are using only $7,500 of $20,000 available, or 37.5%. If you close the two unused accounts, you’re now using $7,500 of $10,000 – or 75% of your available credit.

The truth: If you can pay down your debt, definitely do it. But once the accounts are paid, leave them open.

You’ve also heard that inquiries on your credit lower your score. This is true if the inquiries come from specific retailers, but not if you check your own score. Mass pre-approval inquiries are also ignored when your credit is calculated. Retailer inquiries lower your score by only about 5 points, so don’t be careless, but don’t panic if there’s been an inquiry.

A good rule of thumb when you’re working on getting a Mortgage loan is to not shop for cars, furniture, appliances, etc. until your loan closes. The credit inquiries could damage your score just enough to hurt you – and even paying cash isn’t a good idea. Keep your bank balances as high as possible until there’s no chance that the lender will make a last minute check.

Next is the use of credit counseling. At one time this did affect your score, but a study conducted 3 years ago showed that people using credit counseling did not default on their debts any more than other people. The most current FICO formula ignores credit counseling all together.

BUT – credit counseling can still be risky. Sometimes counseling agencies make payments late or pay lesser amounts – and these mistakes will affect your score.

Good signs for the Mortgage Business in 2009

Thursday, July 10th, 2008

There is no doubt the Mortgage Industry has been suffering for the last 2 years. There has been a ton of banks go out of business and people all over the United States loose their jobs. With all the foreclosures and the downturn in the quality of buyers it has been extremely tough to get some home buyers financed. Luckily FHA is our current market, and allows people all over the U.S. to get financed even though their credit scores may be low.

According to, Bernard Markstein the Senior Economist for the “National Home Builders Association the “First Time Home Buyers” market will be taken off in 2009. He is claiming that the increase in homes sales for this market should increase around 700,000 units. This is great news, because the first time home buyers market drives the real estate market. When first time buyers are active this allows people who need bigger homes to upgrade. In return the new home industry starts building again. This is exactly what our economy needs, because this will create more jobs.

So the hope is the First Time Home Buyers will shrink the overwhelming market of homes for sale currently around the U.S. This will allow other families to move on with the purchase of there new homes.

Yes, getting a loan will be a little tougher but with good credit education it’s really not that hard to get a mortgage loan. During the past years it was just too easy to get a loan, but now the lending market is where it needs to be. We definitely don’t want to go through this process of banks going out of business.

My best advice if you are getting ready to make a purchase soon, is to get a copy of your free credit score report and see where you stand. Your credit score is now more important than ever. In order to get good interest rates most banks want to see at least a 620 plus fico score. Once you pull your credit and find you need some credit repair, you can repair you credit for free. Use the web; it can save you time and money.

About the Author: Mike Clover is the owner of is the one of the most unique on-line resources for free credit score report, fico score, free credit check, identity theft protection, secured credit cards, student credit cards , credit cards, mortgage loans, auto loans, insurance, debt consolidation ,and a BlOG with a wealth of personal credit information. The information within this website is written by professionals that know about credit, and what determines ones credit worthiness

When should you check your credit score report?

Tuesday, July 1st, 2008

There is a lot of debate out there on when you should check your credit report. I am sure you have read that you can get your credit report for FREE at Yes you can, but you get it once a year for free with no credit scores. It is worth paying around $29.95 to get your credit scores along with your credit report. The reason is when lenders make there decision process your scores are part of that process. In the current credit report market you can get your free credit reports with scores on a trial period. So if you are getting ready to make a purchase or have been turned down for some reason, you should pull a recent copy of your credit report with credit scores from each credit bureau. Here is a list of triggers to pull a recent copy of your free credit reports with scores.

• Been recently denied for a credit
• Suspect someone is using your identity
• Suspect a creditor may have reported some late payments incorrectly
• Need to fix your credit report
• About to make a big purchase
• Want to know your credit scores

Even if you don’t have any of the triggers mentioned above you should pull your credit report every 3 to 4 months for good credit management. You never know if someone is messing up your good name. With the new digital age and access to personal information your social security number is floating around everywhere. Typically someone that gets your social security number is an insider at a company that has personal information on file. With the amount of foreign nationals coming to this country your social security number is a hot item on the black market. It is also a hot item with Illegal Aliens. Identity Theft recently has became officially the biggest crime waive in American History. With all of this being said staying on top of your free credit score report is a must. Once something negative has happened to your credit it could irreversible for 7 years. The only thing you can do to fix the problem is get it removed if it’s not your fault. My point being once your scores drop it takes time to regain what the mistake caused.

If you are confused on what type of credit report to get, you might consider a site that offers multiple credit report offers. When you pull your credit report you definitely want a credit report with scores from each credit bureau. Some websites offers only give you a 3-1 credit report with one score. You really need all 3 scores. Some sites offer a credit report with no scores. So my point is you need the right credit report if you are going to pay for it.

How a Co-signer can affect your Credit Report

Tuesday, June 24th, 2008

Do you want your credit score to plummet, go ahead and co-sign for someone. I personally believe this is a huge problem. With your credit score and credit report being the road map to financial health, the question is can you really afford to co-sign for friends and family. Over the years I have seen more problems with this issue. Here is how a co-signer can affect your personal credit.

Late Payments
If you co-sign for a family member your credit report could be at risk. If for some reason the family member is late on an obligation you co-signed for your credit score just dropped about 100 points. Most people don’t thing about this, but it happens all the time. Anytime someone is late on a obligation that reports to all 3 credit bureaus, that bad mark will be on there for 7 years. It’s not worth it. If you have to co-sign for someone make sure you are not getting ready to make a big purchase, because it could affect your purchasing power as well. Some banks like to see a payment history in good standing usually around 12 months on co-signed obligations. They also typically like to see proof that the payment is coming out of the person’s bank account you co-signed for. So co-signing opens up all kinds of worms in the world of finance.

Income to Debt Ratio
Once you have co-signed on a loan for a friend or family member it could affect your ability to get a loan for something else. That added debt that is showing up on your credit report is technically your responsibility as well. Let’s assume you have this car note you co-signed for and the payment is $500.00 a month. You have now added this debt to your portfolio of debts in a underwriters eyes. In order to buy something else an underwriter may require a good 12 month payment history by the other party to disallow a debt from your portfolio of obligations. So with this being said think real hard before you co-sign on anything. I don’t recommend it. There are ways for someone to get there credit established so they can get loans in their own name. The internet is a great resource. There is anything you can imagine on the web to help you achieve just about anything, including getting your own credit established so you don’t need a co-signer.

Credit Q & A

Thursday, June 12th, 2008

Hello Mike,
I have searched all over the web for credit reports with credit scores for free. One thing I have noticed is some sites sell credit reports with one score, and some with no scores at all. Where can I get a credit report with credit scores for free. I would prefer to get a score from each credit bureau. I am getting ready to buy a house and would like to know where I stand. Will this affect my credit score by pulling my report ?

Margarita Jiminez

Hi Margarita,
Great questions you are asking. There is only one site where you get your credit report for FREE, which is At this site you don’t get your credit scores. If you want your credit scores you have to pay for a score with each bureau. If you are getting ready to make a purchase you need to get all three of your credit scores to see where you stand. You can get your credit scores at our site with all 3 credit bureaus on a trial period. Most of our offers will give you all three credit scores. Pulling your consumer credit report does not affect your score at all. This type of credit pull is considered a soft pull according to my fico. If you have any questions don’t hesitate to e-mail us.

Get Credit Report information and credit questions on-line.

Friday, May 30th, 2008

Your credit report is accessible 24/7 on the internet in a few clicks. Equifax just released how the internet is a great resource fore accessing anything about your credit. The internet is amazing in regards to how you can get the information you need to fix just about anything. You can get recipes, commons household items, cars, credit cards, insurance, mortgages, or any common question answered. The internet is so powerful that you could actually stay home and never leave using the internet to buy what you need.

The internet being the best channel for credit reports, credit scores and getting free credit repair help, you can rest assure you will have access to what you need securely in a few clicks. If you want to access your credit report, and did it the old fashion way, you would have to wait for your report to come in the mail. I don’t know about you, but I know the mail is not safe anymore. You definitely don’t want anything with your social in the snail mail if you can avoid it. With the security that has been implement on the internet to get your credit report and credit scores safe and securely.

Most people don’t know how convenient the internet is. The internet has revolutionized the way we all do business and function in society currently. Let’s assume you have credit issues, and you don’t know what to do. Most people will search for credit repair sites. You will find that most credit repair sites charge horrendous fees for something you can do yourself for free. If you were to take the time to do some research, you will find that with a little credit education and implementation of what you learn your credit will improve on its own. The internet is just like your local library, it has all the information you could imagine.

How easy is it to get credit report on-line?
Let’s assume you are getting ready to buy something, or just would like to know what your credit scores are. Getting your credit report is so easy that a caveman could do it. Typically when get your credit report you will need to know your credit scores. Your credit scores will typically cost you around $30.00 to have that piece of mind. But it’s worth having believe me. In a matter of a few seconds with validating who you are, you will receive your full 3-1 credit report. Pulling your consumer credit report does not affect your credit scores by the way.

Credit Repair on the web
Let’s assume you have credit issues, and you would like to start repairing them right away. You can find all kinds of articles about what the first step would be in the credit repair process. With your credit being the single most important part of your financial health, you can rest assure the answer is on the web. In a few keystrokes you can be reading an article that will pertain to your situation. This is the power and resourcefulness of the web today. Got questions about credit? Just Google it.

Disclaimer: This information has been compiled and provided by as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.