The Mysteries of your Fico Score- (Credit Score)

Friday, May 13, 2011

by John Naclerio of Wells Fargo Home Loans

What you should know.

Your credit score is now a critical factor in being approved for a mortgage as well as for the pricing of the loan.

Credit Scores range from 300-850 with 720 being the score you will get the best price from. Generally, below 620 makes it difficult to get a loan and the pricing will be worse.

Your Fico Score is broken down as follows
- 35% based on Payment History
  - Timely payments are critical
  - 30% is based on Credit Owed
    - High amounts owed reduce your score
    - 15% is based on the length of your credit history
      - Two or more years helps your fico score
    - 10% is related to Credit Inquiries
      - Multiple mortgage credit inquiries within 14 days only count as one inquiry
    - 10% is related to the type of credit used
      - Credit cards are looked at as the most risky since they can be recharged every month
TIPS
- Pay down your credit card debt a month or two before applying for a mortgage
- Make sure you pay your debts on time
- Don’t apply for new credit cards, auto loans etc prior to applying for a mortgage