If you want to get a mortgage loan, you'll soon learn about FICO scores. Here's an introduction to the well-known FICO scoring system.
FICO scores are just a mathematical way to show what your credit history looks like. Credit records are just a list of what you owe and what you own. Credit card balances, late payments, bounced checks, and other debts will show up on your credit report. Credit is, of course, a big part of the process of getting a mortgage loan.
A "credit score" is a number that shows how well you handle credit and how much of a risk it would be to give you more credit, like a mortgage loan. The loan underwriter will look at your credit report to see how you've paid off your debts in the past, how much debt you have, and what kinds of credit you already have. Your "FICO score" is a number that shows how all of this information fits together.
FICO
You might be surprised to find out that "FICO" doesn't stand for anything about credit. It really means Fair, Isaac, and Company. This company came up with the math formula that is used to make FICO scores, which people either love or hate. Whether you love or hate the formula depends on what your FICO score is.
FICO scores can be any three-digit number between 300 and 850. The lowest possible FICO score is 350. The best FICO score is 850, which will make bankers bow down to you. The better your credit is, the higher your score, and the more likely it is that a bank will give you a mortgage loan.
Most people's credit is not perfect. So, we find that most people have FICO scores between the low 600s and the high 700s. A few late payments do not usually cause a mortgage application to be turned down.
Whenever you want to buy a house, you should try to get pre-approved for a mortgage loan. One of the first things you should do is find out what your FICO score is.
