2/16/2007

Lenders Tightening Up--Take Care of Your Credit Ranking




It just can't be emphasized enough to keep track of your FICO score, because the name of the game is the higher your score, the more choices you will have and the better rate at a lower cost you will get. As more subprime lenders change their lending guidelines and cut back, as today's announcement concerning Washington Mutual's subprime division Long Beach Mortgage indicates, buyers who want to buy need to learn about what goes into the FICO score. For instance, length of credit history accounts for 15% of your score, and your payment history accounts for 35% of your score, as the graph shows. Keeping your balance owing on a credit card, for instance, to less than 50% of your total credit allowed is also a scoring factor.

No point in going out and buying that new car just when you want to shop for a mortgage loan, because you could be loading yourself up with too much debt. The mortgage industry started using this scoring system in the 1990's, developed by the Fair Isaac Company, and they have specific score breakdowns showing the likelihood of a 90-day late in the near future according to your credit score. If your score is 700 or over, it's 288 to 1; if your score is 600 the likelihood is 4.5 to 1. There are more features, plus the fact that your score comes from 3 agencies and each may be a little different, so lenders develop loan qualifying criteria based on your high and mid-scores. If you want more information, please contact me.

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