How FICO Credit Score is Calculated

Financial Perks of First-Time Homeownership
April 21, 2018
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How FICO Credit Score is Calculated

We all want to get the best mortgage rate when searching for a new home, and one of the single most important factors here is your credit score. This score, which indicates your past creditworthiness and likelihood of repaying a debt properly, will hugely influence lenders in terms of the kinds of loans and rates you qualify for.
At Mortgage Ogden, we’re here to help get you the best mortgage rate possible no matter what. Part of doing so is understanding what will impact your credit score – here are the basic guidelines to know.

Basic Calculation Guidelines

There are a few different scores used when it comes to credit, but the most common is the FICO score – FICO stands for Fair Isaac Corporation, and this score first began being used by lenders about 30 years ago. The FICO score is calculated using information from credit reports, which come from three separate reporting agencies.
The exact FICO formula is proprietary and therefore not known, but experts can derive that it’s calculated using five basic categories with different weights:

• Payment history (35 percent weight): Do you have any missed or late payments in your recent history?
• Outstanding amounts owed (30 percent): What percentage of your total credit are you using? How much do you owe on your accounts, and how many accounts total are you using?
• Length of history (15 percent): How long have your accounts been in use? Have any of the accounts sat unused for a long period?
• New credit (10 percent): How many new accounts do you have, and how long has it been since you opened a new account?
• Credit mix in use (10 percent): What types of credit accounts do you have open, and how many different types are in use?

Credit Score Ranges

Based on the factors above, FICO will give you a score between 300 and 850 – the higher the better. While this can vary between lenders, here’s a basic range for how scores are considered:
• 800 or better: Excellent
• 740-799: Very good
• 670-739: Good
• 580-669: Fair
• Below 580: Poor

For more on credit score or to get a great mortgage, contact the pros at Mortgage Ogden today.