Understanding Credit Scores

Credit scores are used by lenders to determine an individual’s credit risk, and are often referred to as “FICO scores”. Your score will be a major factor in the types of loans and the associated terms and interest rates you will be offered by lenders. Credit scores range from 300-850. The higher your credit score is, the lower the risk to a lender.

While it’s statistically impossible to have a perfect score of 850, if your scores are above 760 you are considered to have excellent credit and will qualify for the best possible rates and terms. 700-760 scores are considered good credit. Fair credit is usually classified as scores between 640-700. Scores below 640 indicate an elevated credit risk to lenders and it starts to become more difficult to qualify and obtain a mortgage loan, though not impossible. The 801-APPROVE Team has lenders who have no minimum credit score requirement and we’ve done mortgage loans for many clients with scores below 640.

FICO stands for Fair Isacc and Company. They are the company that developed the formula that generates a FICO score. It is a closely guarded trade secret that uses a mathematical formula to derive a credit score based on the information in a credit report. There a many things that affect credit scores: payment history, amount of credit card debt compared to your credit limit, total number of outstanding loans/credit accounts, number of times you’ve recently had your credit checked, length of time your loans/credit accounts have been established, etc…

There are three major credit bureaus that maintain credit reports: Experian, TranUnion, and Equifax.  Each of these companies provides consumer credit information and provides lenders with credit reports to help them make lending decisions. Each bureau’s report will differ slightly. That is why it’s good to check all three reports annually for any errors on your credit reports. By law you are entitled to a free credit report from each bureau every 12 months. The site where you can receive your free annual credit report from each bureau is: annualcreditreport.com

Annualcreditreport.com will give you your credit report for free, but if you want to see your credit score; each bureau charges a fee to receive your current credit score. When you apply for a mortgage with the 801-APPROVE Team we will be able to tell you your credit scores.

Credit Repair

If you have had some credit challenges in the past there are ways you can improve your credit scores. There are many companies who do “credit repair”.  We recommend Allied Credit Solutions. They have helped many clients improve their scores and get ready to buy a home. They charge a lot less than most companies, are located right here in Utah, and offer a “No Results, No Charge” guarantee. Tell them the 801-APPROVE Team sent you and receive a discount on their already low prices.

Allied Credit Solutions