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FICO. Why is it so important? Is it possible to trade your 1st born for it? We'll get to that later. Have you found it is becoming increasingly common that your credit scores are the qualifying step that most companies use when trying to determine whether to grant you something that you would like to get? Do you feel as though you've been violated? You should be if your FICO is low....or maybe it just feels like it. You can picture it in your mind, and you get a warm fuzzy feeling over it – it is the idea of buying your own home. You've found the right house and then guess what? Whamm!! A taste of reality hits. Boy, does it taste bitter and sour. When you apply for a mortgage loan, the lender will pull a credit report and look at whether you've made your payments on time on a consistent basis. Lenders nowadays are laser targeted at your credit scores since that is the basis they are using to judge whether and how much to lend to you. What does FICO stand for? No, it does not stand for Feeling It Coming Out. It stands for Fair Isaac Corporation, which is the company that is used by the national credit bureaus to compute the credit scores. Whenever your credit report is pulled, your report is run through a computer program with a built-in scorecard. There is an elaborate computer system that tabulates how many points you get added and how many you get deducted based on your overall financial pattern in handling your bills. Then the computer program uses those points to spit out your scores. For example, here is a list of some of the questions that it will consider: * How long have you had your Visa/Mastercard/Discover/AmericanExpress cards? * How timely are your payments?Do you make the required payments each month? If not, what is your problem?! j/k * Are your credit balances already close to the amount of credit allowed? * Have you recently taken out new lines of credit? The most common elements that have a tendency to drag your score are listed below: * Delinquencies – Does your record show that you don't pay your bills on time? * Short Credit history - Did you just start having credit? * Too many recent credit inquiries - Not good if you have too many * Balances near the maximum limit - Don't do this because it will lower your score * Many credit cards, loans, lines of credit open at the same time - You can go crazy one day and max everything out * Tax liens and bankruptcies - Enough said. these will really ding your credit Lenders have found that the higher the credit score, the better the chance payments will be made on time. So, keep this in mind! The scores range from 300 to 850 and a score above 700 is usually considered "very good." Credit scores are an important factor in approving mortgage loans. With low credit scores, you have a tougher time qualifying for a loan and it will result in you paying higher interest rates on the loan. Just when you think this news is depressing and your chances of buying a home are thrown out the window, there is a light at the end of the tunnel. We wouldn't lead you down this dark and confusing path and abandon you, now would I? There are ways to fix your credit. There are two options. The first option is you can improve your credit yourself. Take it one step at a time—reducing your debts, paying off some of it, discussing with your creditors to payoff any collections at a discount, staying away from opening any new credit lines, etc. The services of a credit repair company can also come in handy for an occasion such as this. My advice is that if you choose this route, make sure you research the credit repair company well to confirm that they will produce results for you. It is sad to say, but as in any business, there are credit repair companies out there that promise you the world, but they don't actually deliver the results. Since the company will be working on your credit record, you want to thoroughly review the repair company before jumping in. There are many things you can do to improve your scores, and by doing so, you make a significant impact on your financial future. Having higher credit scores does save you money. Oh, I almost forgot, the third option for improving your credit score is.... ummmm..... trading in your first born. I would not recommend this though....
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