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Understanding FICO/Credit Scores

  1. FICO scores, aka Credit scores, tell creditors how much of a risk you are, or how likely you are to repay the loan.

  2. Lenders have found that borrowers with higher credit scores are less likely to default on a loan.

  3. You have three (3) credit scores, not just one (1).

  4. There are three (3) major credit reporting agencies: Transunion, Equifax and Experian.

  5. Don’t be surprised if your three (3) credit scores are different; credit reporting agencies may use different computer scoring software.

  6. The range is between 300-900 for certain credit reporting agencies, and 340-850 for others.

  7. The higher the score, the better, and the lower of a risk you appear to be to a lender.

  8. The vast majority of folks fall in the 600s and 700s.

  9. Credit scoring is based on Five (5) Factors:

  10. Credit scoring software only considers items on your credit report. Mortgage lenders typically look at other factors that aren’t included in the report, such as:

  11. Beware of “credit repair” organizations which promise to raise your credit score for a fee. This may be fraud, according to the Federal Trade Commission.

The only true credit score quick-fixes are:

  • pay down debt

  • successfully dispute negative information on your credit report

* Disclaimer: This is intended to be a general guideline and is not a comprehensive explanation of credit scores. Do not rely solely on this information. To obtain the most comprehensive, accurate information, seek counsel from a professional or expert in the area, a representative of the credit reporting agencies, and several licensed mortgage brokers or loan officers.

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