Credit history files
can contain mistakes that may damage your ability to borrow money. It is important to
periodically review your credit history to be sure it is accurate.
The three major credit reporting agencies are:
Each agency keeps slightly different
information about consumers, so it is a good idea to request a report from each.
What is FICO? FICO stands for Fair Isaac & Company, and
credit scores are reported by each of the three major credit bureaus: Experian (TRW),
Equifax, and Trans Union. The score does not come up exactly the same from each bureau
because each bureau places a slightly different emphasis on different items. Scores range
from 365 to 840.
Some of the things that affect your FICO score include:
- Delinquencies
- Too many accounts opened within the last
twelve months
- Short credit history
- Balances on revolving credit are near the
maximum limits
- Public records, such as tax liens,
judgments, or bankruptcies
- No recent credit card balances
- Too many recent credit inquiries
- Too few revolving accounts
- Too many revolving accounts
The credit score is actually calculated using a "scorecard" where you receive
points for certain things. Creditors and lenders who view your credit report do not get to
see the scorecard, so they do not know exactly how your score was calculated. They just
see the final scores.
Basic guidelines on how to view the FICO scores vary a little from lender to lender.
Usually, a score above 680 will require a very basic review of the entire loan package.
Scores between 640 and 680 require more thorough underwriting. Once a score gets below
640, an underwriter will look at a loan application with a more cautious approach. Many
lenders will not even consider a loan with a FICO score below 600, some as high as 620.
