What is a FICO Score?

Hi and welcome to another Two Minute
Tuesday video. Today I’m going to talk about your credit score also known as
your FICO score. One important aspect of purchasing a home is getting a mortgage
and getting a good low rate is dictated by your ability to prove your
creditworthiness. The term you’re all familiar with is FICO score which is a
rating system that lenders used to gauge what kind of risk you are when applying
for financing. There’s a saying in the business that past history is indicative
of future performance, so how you’ve managed your finances in the past will
pretty much be how you manage them when you get a new loan. There’s a lot of
misconceptions about what your credit score is and how its measured. First
there are thirty different credit scores on your record, so depending on what
you’re financing a different model and different score will be used. You can go
to my FICO dot com and for $60 you can see all thirty scores plus all of your
credit accounts. If you go to creditkarma.com or look on your bank
statement you’ll see what’s called a consumer information score which is 20
to 40 points higher than your mortgage score and if you’ve reached a recently
purchased an automobile that score is also 20 to 40 points higher. N either of
these scores will be considered by a home loan lender. So what items make up
that mortgage FICO score? Well 35% is how you pay your current mortgage and
installment loans, such as auto loans, student loans, etc. Are you always on time
or have you had any late payments? The next 30% is credit utilization. Credit
card or revolving accounts that may have a changing balance every month. These are
your MasterCard and Visa American Express Nordstrom and other retail store
cards. Having a low balance on a high limit card is good credit utilization so
$1,000 balance on a $5,000 card is helpful while four hundred and fifty
dollar balance on a $500 card is detrimental. Another 10% is the length of
time you’ve had a credit account open. It’s best never to close a credit
account. Keep the account open and occasionally charge something and pay it
off over a month or two. make sure to pay it on time. 15% of your
credit score is product mix so they consider the variety of credit accounts
that you have open, and the last 10% is new new credit and enquiries. There are a
lot of misconceptions about enquiries being harmful. While all mortgage
inquiries should count as one if drawn within a 30 to 45 day window, a mortgage
underwriter may still look at how many you have and draw their own conclusions.
Let me just say, the fewer the better. Now I’ll leave you with a few FICO tips. One
maxed out credit card can hurt you by 100 points. You might be able to remedy
this by getting a credit limit increase or paying down the amount owed. Debt
ratio has no effect on your credit score and assets and liabilities
liabilities similarly have no effect. Derogatory reports like a short sale or
a foreclosure may stay on your record for 10 years although there are only counted
for 7 years but the underwriter will still see this on your record. And last
and most importantly, your credit will be checked by the underwriter just before
the loan is funded so don’t go out and purchase new furniture, appliances, a new
car or even open a store credit card so you can get that extra 25% discount on
today’s purchase. These will lower your final score and may disqualify you from
the loan you’re just days away from signing. So I’d like to thank a couple of
associates who helped me with this information today. Randi Lynch from
Golden Empire Mortgage – he’s the guy that will help you get a great loan and
Bob Topham from One Point The Difference. He’ll help you with credit
repair issues. I’ll leave their information down below.
So if you found this video informative give it a like or thumbs up and share it
with your friends on social media. If you have any questions or comments just
leave them down below and I’ll see you on the next video. Thanks for watching. If you know someone
who needs to buy sell or invest in real estate I’d love to hear about them. Just
contact me and I’ll take good care of them. You can reach me at JohnAlesi.com or just find me on Facebook Thanks a lot

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