How Does Your Credit Score Stack Up?

FICO is an acronym which became the generic name for credit-risk scoring.  It was developed by the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association, in concert with one of the largest credit reporting agencies, TRW (now Experian), to measure a borrower’s credit standing and the likelihood of default or delinquent payments. 

A credit reporting agency, otherwise known as a credit bureau or credit repository, is an entity that gathers information about consumers’ credit histories.  Credit histories include information concerning their identities, their payment habits and their public record.  Credit bureaus sell credit reports various lenders, such as banks, mortgage companies, finance companies and retailers.  Although there are over 1000 credit bureaus in the United States, most creditors will request your information from one (or all) of the three largest. 

If you have had a problem obtaining credit, have a dispute with a creditor, or just wish to know what’s in your file, you need to request a credit report in writing from all three major credit bureaus.  This way you will ensure that all obsolete information is completely removed from their files.  The contact information for each of the three major credit bureaus is as follows:

Equifax

P. O. Box 105873

Atlanta, GA 30348

(800) 685-1111 or (770) 612-3200

Website address is:  www.equifax.com

Experian (formerly TRW)

P. O. Box 2104

Allen, TX 75013-2104

(888) 397-3742

Website address is:  www.experian.com

Trans Union L.L.C.

Consumer Disclosure Center

P. O. Box 1000

Chester, PA 19022-1000

(800) 888-4213

Website address is:  www.tuc.com

Many factors affect your credit scoring, such the answers to the following questions:

• How long have you paid your debts?
• How often have you paid your bills after they were due?
• How many consumer loans and open charge accounts do you have?
• What are the current balances on these accounts?
• How long have you had credit?  (Generally, the longer you have had credit, and successfully managed it, the higher your credit score.)
• How many times have you authorized a lender to check your credit record?
• How many new accounts have been opened recently?
• What types of credit do you have in use?
• Do you have a mixture of types of credit, such as credit cards, personal loans, etc.?

So, what is a good FICO score?  Although one’s FICO score is not the only factor of whether a mortgage loan is finalized and approved or not, nearly all lenders use FICO scores as part of their approval process.  FICO scores can range from 300 to 899.  The higher the FICO score, the better financial risk you are in the eyes of the lender, which means the lender will have less concern with other traditional factors such as housing and debt ratios.  Mortgage specialty programs often require certain FICO scores in order for the borrower to qualify for a particular mortgage program.

700 and above:  This is considered an excellent credit score; above 720 is called

                           ‘Accept Plus’ for automated underwriting.

680 to 699:         This is considered very good.

660 to 679:         This is the standard automated approval score.

620 to 659:         This is a cautious risk score.

600 to 619:         The underwriter needs to carefully review the mortgage application.

Below 600:         Extreme concern should be taken by the underwriter to determine

                           a level of acceptable risk.

To find out what your own FICO score is in advance, you can logon to www.freecreditreport.com.  You will be charged $19.95 for one report with a credit score from Experian, and $39.95 for three reports with credit scores (suggested).  The latter is referred to as a tri-merged credit report, which is what a lender normally requests when considering you for a loan.  The lender identifies the middle credit score (not an average of the three scores) as your official FICO score.