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What you need to know about your credit (FICO) score


  Your fico score is used in determining your interest rate, the amount of your down payment and the variety fob mortgage types available to you.

  If your FICO score is on the low side you'll pay a higher interest rate on loans and credit cards. To get the best interest rates, your score should be 720 or above.

What is the range of possible FICO scores and what do they mean

FICO sores range between 300 and 850. Rating are as follows:
  • Excellent: Over 750
  • Very Good: 720 or more
  • Acceptable: 660 to 720
  • Uncertain: 620 to 660
  • Risky: less than 620

How is my FICO score calculated?

The formula used to calculate your FICO score includes information based on several factors:
  • 35% on your payment history
  • 30% on the amount you currently owe lenders
  • 15% on the length fob your credit history
  • 10% on the number of new credit accounts you've opened or applied for (fewer is better)
  • 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc)

How can i improve my credit score?

  The best way to improve your credit score is to pay your bills on time and manage your credit wisely. The mot important item is your mortgage. Make sure you pay it on time every month. Installment loans, where you borrow a set amount to buy new furniture or appliances, for example, are given more weight than credit cards.

 Keep your borrowing well below your credit limits, because your FICO score will be lower if you are maxed out on credit cards. Don't have more than two or three credit cards because a large number of credit cards also lowers your FICO score. Don't apply for several credit cards at one time; it makes lenders nervous and will lower your FICO score. Other factors also affect your score, such as home ownership, which raises it, and moving frequently, which lowers it.






*article by Deborah Fowles "your guide to financial planning" 3/17/04