Created by the Fair Isaac Corporation, the FICO score is an important factor that lenders use when assessing loan or mortgage applicants' credit risk. An individual's FICO score ranges from 300 to 850 and indicates bad or good credit history. People with scores below 620 often have difficulty in applying for financing while those with score above 650 generally have good credit history. The FICO score considers these categories to determine credit risk.
Payment History
This component makes up thirty-five percent of the FICO score and includes account payment information on type of accounts such as credit cards, installment loans, and finance company accounts. Payment history also reflects adverse public records like bankruptcy, judgments, or wage attachments. This FICO score component also shows amount past due on existing delinquent accounts or collection items. If you have good payment history, other lenders are more ready to allow you to borrow from them.
Amounts Owed
Thirty percent of an individual's FICO score also depends on the current level of indebtedness. This factor shows information on amount owing on specific types of accounts, number of accounts with balances, and proportions of credit lines used and of installment loan amounts still owed. If you still have a considerable amount owed to different entities, you'll have a hard time getting approved for another loan, mortgage, or purchase.
Length of Credit History
Aside from the different amounts you've borrowed, fifteen percent of FICO score also factors in how long your outstanding credit accounts are. This component considers time since accounts opened, what the specific account types are, as well as the time since account activity. For those applying for
Dallas home loans, your lenders consider these categories to determine your credit risk and if you're trustworthy and consistent enough to pay your debts.
Types of Credit Used
Companies that offer
Dallas home loans also factor in types of credit used when calculating ten percent of your FICO score. This category reflects the number, presence, and prevalence of different account types you've encountered in the past. This also provides recent information on any existing credit cards, mortgage, installment loans, and consumer finance accounts.
New Credit
While your past records affect your FICO score, your recent finance and accounts activities also influences ten percent of your FICO credit score or ratings. To get a better chance of approving your
Dallas home loans, increasing your credit limit can help your credit score. Keeping your FICO scores high can help you enjoy flexible financing, budgeting, and purchasing options in industries like real property. Consult your lender to know more about how your FICO ratings are determined.
