Credit Security Group

Credit Score Education

Frequently Asked Questions About Credit Scores for Home Loans

What is in my credit file?

Names and addresses the credit bureau believes (rightly or wrongly) have been used by you. Your positive credit history: creditor, type of credit and, if ongoing, the current status of the account.

Your negative credit history: past due payment history, collection accounts.  Public records of bankruptcy, repossession, liens and judgements.

What information is not in my credit file?

The following are not part of your credit file or score:

Your age, race, religion, national origin, gender, marital status.

Employment: your salary, occupation, employer, job history

Personal: alimony or child support or have had credit counseling

Soft credit inquiries: when you check your own credit report or someone sends you a pre-approved offer.

Your bank account activities or interest rates on existing credit or loans.

How long does negative information stay on my credit report?

Excluding some public records concerning taxes, seven years.

Note: this is how long is legally allowed and how long it should be on your report. We often find negative information on credit reports that violate this law.

What is a credit score?

A formula, or algorithm that analyzes the information in your credit file and returns a number or score.

Your score indicates your risk to creditors or lenders. The lower the number, the more risky you are determined to be.

What is a good credit score?

At least 660 for your FICO score.

FICO scores range from 300 to 850 depending on your assessed risk:

Poor: Less than 580
Fair: 580 - 669
Good: 670 - 739
Very Good: 740 - 799

Exceptional: Over 800

What is a FICO score and why is it important?

FICO (Fair Issac Corporation) develops computer models to determine lender risk. The level of risk is represented by a number: your credit score. This is the credit score over ninety percent of lenders use.

There are different FICO score models for different types of credit: auto, credit card and mortgage. 

 

What about credit scores other than FICO?

Non-FICO credit scores are called FAKOS. These are not used by lenders and are for educational purposes only. This is the score you often get for free from free credit report websites.

What credit score do I need to get a home loan?

The minimum credit score for a home loan is 620.  This is a FICO (not FAKO) mortgage midscore, meaning the middle (or mean) score of all three credit bureaus.

The score model used for mortgage lending is different than that used for auto loans or credit cards. These scores may be different for the same person.

Where do I find my home loan credit score?

There are only two ways you can get your score that is used for mortgage lending: your FICO mortgage score:

  1. From a mortgage professional you authorize to check your credit.
  2. You can get your mortgage FICO scores from myFICO.com.

Scores from free credit report websites are not FICO scores and FICO scores from credit card companies are not mortgage scores.

What causes my credit score to go down?

Your credit score is a measure of you history in using credit. If you use different kinds of credit – keeping all your commitments perfectly – your score will increase over time. History is time, the longer the better.

Your score goes down with lack of credit history, late payments, repossessions, bankruptcy, liens.

Who can see my credit score?

Lenders to whom you apply for credit.

Lenders who want to send offers to extend credit (unless you opt-out of these offers.)

You when you request them.

Can an employer see my credit score?

Your employer, or prospective employer cannot see you credit score, but they can see much of your credit history by getting an Employment Credit Check (only with your permission).

Does income matter to my credit score?

No. Rich, middle class and poor people can all have high scores - or low scores.

Your credit score is a measure of your ability to keep credit commitments. Lenders use it for this purpose, not how much to lend.

Your income, and debt, determine much credit you can afford and how much credit lenders will extend to you.

What You Need To Know About Credit

What is good credit? What is bad credit? How important is your FICO® score? How can you enhance your credit? How can you ruin it? How can your credit score affect your life?

Read More: What You Need To Know About Credit.

How To Remove Dispute Wording From Your Credit File

Navigating successfully through the application paperwork and cruising toward closing, the Bakers were shocked to learn their credit scores were suddenly 50 points lower.

They no longer meet the minimum credit score requirements for their mortgage. Mortgage denied. The Baker’s story is not unusual. So what happened?

Read: How To Remove Dispute Wording From Your Credit File.

 

More articles on credit scores for mortgage loans…