Mariana Wagner

Simple Colorado Springs Real Estate Definitions: FICO

There is a lot of potentially confusing terminology in the business of Colorado Springs real estate. Here is a great explanation of a term we hear often: FICO

The basis of most mortgage lending is credit scoring.  In general, the higher a person’s credit score, the lower his offered mortgage interest rate.

Despite the many credit scoring models in use today, however, just 3 are relevant to American homeowners:

• The Equifax BEACON^® score
• The Experian Fair Isaac Risk Model
• The TransUnion EMPIRICA^®

Generically, these scoring models generate what are commonly known as “FICO” scores.

FICO scores are measurements of probability.  The higher a person’s credit score, by definition, the less likely a person is to default on his home loan.  This is one reason why credit scoring has added importance lately — mortgage lenders are very careful about what they’re lending and to whom.

Notably, minimum FICO thresholds have been added to all types of mortgage loans.

FICO scoring has 5 main components as listed above.  Payment history and credit capacity are two of the largest pieces, but a myriad of other factors contribute to a credit score, too.  For example, the longer your reported history of managing credit, the more favorably your credit score will respond.

The myFICO.com website does a terrific job with credit education, explaining in plain language the ins-and-out of credit scoring and ways to boost your score.  It also makes a free, 20-page PDF available for download.

Whether you’re a homeowner or lifetime renter — consider it required reading.

[Information provided to the Colorado Springs Real Estate Connection courtesey of the mortgage and real estate professionals at Bring the Blog.]

April 6th, 2009 by Mariana Wagner | 1 Comment »

This entry was posted on Monday, April 6th, 2009 at 5:29 pm and is filed under BUYERS, Mortgage and Finance, Real Estate Glossary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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