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5 Tips for Better Credit
How Your Credit Rating Affects Loan Rates
Fair Issac, the company that created the current FICO® scoring system used by lenders to evaluate the
credit worthiness of potential borrowers, has recently made changes that could affect your ability to
secure a mortgage and purchase your home.
It is important to understand exactly what a FICO® score is – and what are the elements that decide
with consumers will receive the most favorable rates offered by lenders.
What’s in Your FICO Score
FICO® Scores are calculated from a lot of different credit data in your credit report.
This data can be grouped into five categories as outlined below. The percentages in
the chart reflect how important each of the categories is in determining your FICO®
score.
Fair Issac, the company that created the current FICO® scoring system used by lenders to evaluate the
credit worthiness of potential borrowers, has recently made changes that could affect your ability to
secure a mortgage and purchase your home.
It is important to understand exactly what a FICO® score is – and what are the elements that decide
with consumers will receive the most favorable rates offered by lenders.
What’s in Your FICO Score
FICO® Scores are calculated from a lot of different credit data in your credit report.
This data can be grouped into five categories as outlined below. The percentages in
the chart reflect how important each of the categories is in determining your FICO®
score.
These percentages are based on the importance of the five categories for the general
population. For particular groups - for example, people who have not been using credit
long - the importance of these categories may be somewhat different.
population. For particular groups - for example, people who have not been using credit
long - the importance of these categories may be somewhat different.
• Account payment information on specific types of accounts (credit cards, retail accounts, installment
loans, finance company accounts, mortgage, etc.)
• Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.),
collection items, and/or delinquency (past due items)
• Severity of delinquency (how long past due)
• Amount past due on delinquent accounts or collection items
• Time since past due items (delinquency), adverse public records (if any), or
collection items (if any)
• Number of accounts paid as agreed
loans, finance company accounts, mortgage, etc.)
• Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.),
collection items, and/or delinquency (past due items)
• Severity of delinquency (how long past due)
• Amount past due on delinquent accounts or collection items
• Time since past due items (delinquency), adverse public records (if any), or
collection items (if any)
• Number of accounts paid as agreed
#2 Debt - The Amount of Debt You Carry...Close Second
• Lack of a specific type of balances reported
• Number of accounts with balances
to total credit limits on revolving accounts)
• Proportion of installment loan amounts still owing
(proportion of balance to original loan amount on
installment loans)
• Number of accounts with balances
to total credit limits on revolving accounts)
• Proportion of installment loan amounts still owing
(proportion of balance to original loan amount on
installment loans)
#3 Length of Credit History-Age Matters
• Time since accounts opened
• Time since accounts opened, by specific type of account
• Time since account activity
• Time since accounts opened, by specific type of account
• Time since account activity
• Number of recently opened, by type of account
• Number of recent credit inquiries
• Time since recent account opening(s), by type of account
• Time since credit inquiry
• Re-establishment of positive credit history following past payment problems
#5 Types of Credit Used-Mix It Up
• Number of (and recent information on) various types of accounts (credit cards, retail accounts,
installment loans, mortgage, consumer finance accounts, etc.)
• Number of recent credit inquiries
• Time since recent account opening(s), by type of account
• Time since credit inquiry
• Re-establishment of positive credit history following past payment problems
#5 Types of Credit Used-Mix It Up
• Number of (and recent information on) various types of accounts (credit cards, retail accounts,
installment loans, mortgage, consumer finance accounts, etc.)
Chicago Illinois Home Mortgage Lender
#4 New Credit
#1 Payment History