Mortgage Lenders like Big Credit Picture

There are significant differences between a credit report and a fico score is the difference between a chapter and the entire novel. The novel tells the complete story, and when it comes time to get a mortgage, you definitely want to tell your lender as complete a story as possible. The reason that your score is more important is because while your credit report says what you have done in the past, your credit score predicts how likely you are to pay your bills in the future. Your credit score will also go a long way to determine what interest rate you will pay on your mortgage.

FICO scores are based on 23 factors grouped into five distinct categories that are weighed, measured and balanced in an algorithm-an intricate mathematical formula known only to Fair Isaac Corp. Watts says that each of those five categories has a different value. A "perfect" score would be 800. Lenders prefer to deal with people in the upper-middle and high 700s, and having a score in that range would likely make you eligible for the best mortgage rates available. You can buy a copy of your own credit report and the FICO score it is given by signing on to www.myFICO.com. Once there you can buy a report from any one of the credit reporting agencies, or get all three.

The most important category, the one that counts for 35 % of the final score, is based on credit history. The question it answers is: How has the person paid bills in the past? The equation includes both positive and negative information. You gain points for not having missed any payments and lose them if you have missed some. It also measures the differences between being merely late, missing a payment or having something repossessed. Next is how much you owe, and this is worth 30 % of the final score. Credit reporting agencies do not know how much people make or what assets they have. "Instead, we measure debt against their credit limit. A $20,000 debt load measured against $20,000 credit limit will score lower than a $20,000 debt load against a $100,000 credit limit.


 

 

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