First let's understand what Fico scores mean:

      FICO is a credit scoring model created and developed by Fair Issac and Company. It is a number from anywhere between 350 and 850. The cutoff for good credit is usually 620 for most lenders. Fico scores dramatically affect the rate you receive, once you score falls below 620 your rate starts to rise significantly. The lower your FICO, the greater the credit risk a borrower is in a lender eyes. When lenders run your credit they usually obtain a trimerged report which is composed of three seperate scores from the three major credit reporting agencies (Experian, Equifax and Transunion). Not all credit companies, banks etc, report all of your payment information to all three credit reporting agencies, hence you scores will be different from agency to agency. Lenders will usually pick the middle of three fico scores and use that to qualify you for a mortgage. Late payments, outstanding judgements, high balances, short credit histories, and too many credit inquiries at one time will all negatively affect your FICO score. It is important to constantly watch your credit to stay on top of your score. You can do so by going to www.myfico.com. It contains more specific information on how your score is computed and a fico simulator that you can use to help gauge/repair you credit score. We have posted this credit scoring booklet from www.myfico.com on our site so you can download it immediately. Reading it thoroughly it will give you a good overview of the factors that affect your score.


Credit Scoring Booklet


If you happen to have bad credit, luckily FHA loans are much less driven by FICO scores than other mortgages. The only problem is FHA is a strictly FULL DOC Program. On loans other than FHA, lenders depend very heavily on FICO scores to determine rates. If you are an all cash employee and have no w2s you will need to prove income with bank statements and have to find an alternative stated income or no income program. Unfortunately FHA does not offer these at this time. Click here to find alternative less than perfect credit programs.

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