By financen | October 20, 2008 - 6:12 pm - Posted in Credit Score, FICO score

When anyone applies for a loan or a new credit, many lenders go through his FICO scores and review his credit history. If you are having a poor credit rating, you may not qualify for the loan or even if you do so, you will be charged very high interest rates because of the low FICO scores.

As per the laws, Fair Issac and Company is not required to disclose how they calculate the FICO score. The content on the credit report weighs heavily on the calculation.

The FICO score system is quite straightforward. You will be able to get better interest rates and attractive offers from different lenders if you have high FICO scores. Besides, you will also get qualified for higher loan amounts because of the scores.

Someone having a FICO score of less than 500 has limited options if he is applying for a mortgage loan. There are many sub prime mortgage lenders that specialize in bad credit mortgages, however you will have to pay a premium for their services.

If your FICO score is between 500-600, you will get competitive financing from the market. You may be required to pay points up from in order to qualify. Points are prepaid interest that you must pay when required, at closing. A “point” is 1% of the total loan amount financed. This is not a payment on the loan balance, in many cases this is an up-front fee your lender is requiring for you to qualify.

Someone having a FICO score in between 640-700 has very good chances of finding a mortgage with very good interest rates and the terms and conditions improve dramatically. You always have the room to negotiate with the lender for better interest rates and fewer fees because of the FICO scores that becomes a bargaining chip for you.
If your FICO score is more than 700, then the mortgage lenders will be falling over themselves for your business. You can qualify for almost 125 percent of your home value. Based on your FICO scores, you should be able to negotiate with the lender that you should not be charged any kinds of fees or penalties whatsoever. With this kind of scores, you must always compare loans, credit card, compare mortgages offers.

The FICO scores are calculated on the basis of the information reported on your credit report. Make sure that all the items reported on your file are correct. These records are maintained by three separate companies and are prone to errors. You must always pay down the balances on your credit cards and close any accounts you do not need. You should also ensure that the payments are done on time and the creditors are reporting your payments to the credit bureaus. You should not carry large balances on your credit cards. Do not make any large purchases while shopping for a mortgage, and do not let lenders access your credit until you have selected the best mortgage. Your FICO scores will get damaged because of too many credit inquiries by the lenders.

This entry was posted on Monday, October 20th, 2008 at 6:12 pm and is filed under Credit Score, FICO score. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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