Your Credit Score
What Does It Mean?
FICO Credit Score
Before you apply for a loan it is important to know and understand your credit score. When I say, your credit score what I mean is your FICO score.
This is the scoring system that runs from 300 to 850 that lenders use. There are other scoring systems, some use numbering systems similar to the FICO score, some use letters. Other scoring systems can be misleading and of little value.
To establish your credit score, the lender will normally gather information from all 3 credit reporting agencies. These agencies are Experian, TransUnion, and Equifax. A lending professional will be able to get your credit score for a small fee of around 10 to 20 dollars. It is good to know what your credit score is, but multiple credit checks should be avoided. To many credit enquiries could actually have an adverse effect on your credit.
Credit Score Breakdown
- Payment History: 35%
- How much you owe: 30%
- Length of credit history: 15%
- Recently issued credit: 10%
- Types of credit used: 10%
In recent years lenders have tightened up credit score expectations.
This is largely due to the financial crisis of 2008.
Here is an example of how a lender may look at your FICO score today.
- Excellent: 760-850
- Good: 700-759
- Fair: 620-699
- Poor: Below 620
Of course, your credit score is a determining factor of weather you can qualify for a home loan or not. Different types of loans have different minimum credit requirements. Your credit score also affects the interest rate you have to pay as well as how much of a down payment will be required. If the loan requires mortgage insurance, your credit score will affect how much it costs.
Married Couple's Credit Score
Getting married does not change your credit score. Your credit score is individual. Financial obligations taken jointly after you get married will affect both credit scores, but your credit is still individual.
If two people are going to be on the loan, than both credit scores will be used. Sometimes one person's credit will kill the deal. Both parties of a married couple are not required to be on the loan, but if only one is named on the loan, there income is the only income that counts for loan qualification. Both parties can be on title, with only one party on the loan.
There is a difference between a credit report and a credit score. A credit report will give you the derogatory information that will cause the lower credit score. It is important to know what is on your credit report from all three agencies. The information will very and it is likely that there are mistakes. It may show issues as being unresolved, that have been resolved.
You may get your credit report for free at least once a year from each of these credit reporting agencies. The report is free, by law, but they don't have to give you a score for free. The report is the information that is useful, and this is the information you need. When you get your report, they will give you the option of paying a small fee for a credit score. It is unlikely that this will be a true FICO score.
AnnualCreditReport.com is a website sponcered by the 3 credit reporting agencies that you can get your credit reports for free.
written by:Todd Hays