top of page

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:

    35%: Your Payment History (how well you pay your bills). The below will negatively impact your credit score:

    • missed payments and late payments. a 30-day late payment can reduce your score by as much as 45 points

    • bankruptcies (a bankruptcy may reduce your credit score by as much as 240 points).

    • foreclosures and short sales

    • charge-offs

    • repossessions

    • loan defaults

    • debt settlements

    30%: Amounts You Owe (total amount of debt you owe.)

    • First, lenders look at your debt-to-income ratio which factors in how much you owe against how much income you make. The higher your income, the higher your limit for borrowing.

    • Next, lenders look at debt-to-credit ratio, meaning how much of your available credit you have used. Lenders do not look favorably on those who have used 100% or maxed out their credit limits.

    15%: Age of Your Credit History and Number of Inquiries

    • A long history of good use of credit suggests to lenders that you are a good credit risk.

    • Inquiries are a related factor, which are also adversely affected by opening new lines of credit. Each time you apply for credit, the credit card company looks at your credit report. This is called an “inquiry” or a “pull” and it shows up on your credit report. Too many inquiries can lower your credit score because it may suggest to lenders that you are borrowing more than you can handle.

    10%: Variety of Types of Credit Used. Ironically, more is better. Lenders prefer a variety of debt in your credit history, both secured and unsecured. Secured Debt is debt which has collateral, such as home loans and car loans, while unsecured debt is debt without collateral, such as credit card debt. Lenders believe that someone who has timely paid off a variety of debt is a lower risk to them than someone who has never borrowed certain types of debt at all. 10%: Amount of New Credit For Which You Apply

  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:

    • debt-to-income ratio: the ratio of housing expense to your income

    • ability to make a down payment

    • ability to document your income

    • employment history

    • type of credit you are seeking

  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.

If you have questions about the application of the law in a particular case, consult your lawyer. The law is constantly changing. Information on this site or any site to which we link does not constitute legal advice.


All information, materials and links on this website are solely intended for the use of informational purposes and do not constitute legal advice. 


Transmitting or viewing the materials on this website does not in any way create an intention on our part, a receipt on your part, or a constitution of an attorney-client relationship with the attorneys at The Law Offices of Hoy & Sahlas, LLC. 


We have provided all materials, information and links on this website to individuals or entities interested in obtaining information concerning The Law Offices of Hoy & Sahlas, LLC. and the law firm’s practice areas. 

All information contained on our website is published only as general information not specific to individual cases and may not reflect the most recent developments in the law or in a specific location or individual situation. 

Materials and information contained on our website is not provided in the course of any attorney-client relationship. The information contained in this Web Site is not intended to constitute legal advice, nor as a substitute for seeking and obtaining legal advice from a qualified attorney licensed in the viewer’s state. 

Anyone viewing this website and the materials and information contained therein should not rely upon or act upon those materials and information without first seeking individual counsel from a licensed attorney in the applicable State. This website is not intended to constitute advertising for The Law Offices of Hoy & Sahlas, LLC.  This firm does not seek to represent any person or firm based upon viewing of this website in any State where this website fails to comply with all applicable laws and rules of professional standards/ethical conduct requirements in a given State.

bottom of page