Credit Score Basics

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How is credit score calculated?

Consumers are generally aware that it is important to have a good credit score. Potential landlords, insurance companies, creditors, employers, lenders and others make business and hiring decisions based on a FICO score. Building a higher score and a better credit profile are financial decisions that people can make. Not only will a high credit score save a lot of money during a lifetime, but a high score demonstrates a borrower's creditworthiness. A low score, on the other hand, can result in negative outcomes.

A credit score is calculated based on the following factors:

35% Payment History - Tracks the number of accounts with balances and timely payment. Negative impact on the score results from late payments and how late after a due date payments are made.
30% Amounts Owed - Tracks how much is owed on accounts relative to established credit limits.
15% Length of Credit History - Tracks the total length of time clients have owned each account.
10% Types of Credit Used - Tracks the total number of accounts and types of accounts (bank or retail).
10% New Credit - Tracks the number of accounts recently opened.
Here is the general rule of thumb about how creditors assess a credit score:

FICO Score    Grade
< 620              High risk
620-659          Uncertain
660-679          Average
680-719          Good
720-739          Very good
> 740               Excellent

Contact a mortgage advisor for a free credit score consultation or call us at 925-236-9500