Sam Coleman

Home Loan Specialists, Inc.

Mortgage Update

Credit Score and FICO® SCORE FACTS

What does FICO® Score mean anyway? FICO® Score is a score that was developed by Fair Isaac Company, a California company that specializes in constructing statistical scoring models. This score is a single number ranging from 350 to 850® score. The number is calculated using past credit history data. Fair Isaac developed this scoring model using millions of actual consumer credit data files to develop a complex and secret mathematical algorithm. Since FICO® is the developer and owner of the model, it is proprietary, consequently it is impossible to know exactly all the credit variables considered and how they are weighed by FICO®.

Each Bureau calls its FICO® score something different but the score it represents is the same no matter what bureau you use. The risk is defined in the number of accounts that default based on the score. Some example ranges include the following estimates:

· Scores below 601 yield 8 good loans for each bad one.

· Scores from 700-729 yield 129 good loans for each bad one.

· Scores at 800 plus yield 1,292 good loans for each bad one.

The little we do know is that the model contains 33 variables that were found in combination to be most predictive of an individual's future ability to repay a loan. These 33 variables are grouped by FICO® into five categories. They are:

1. Previous credit performance

2. Current level of indebtedness

3. Amount of time that the credit has been in use

4. Pursuit of new credit

5.Types of credit available

FICA's ®model evaluates how these variables interrelate and supposedly how the interaction will likely affect mortgage performance. By evaluating the historical performance of loans. FICO® claims they can tell us something about the future performance of loans with similar credit characteristics — the risk of extending credit.

Accompanying every score are four "reason codes". These codes identify four of the 33 variables that have the most influence on lowering the credit score. This gives us some insight into the credit score. Examples reason codes are:

· current delinquency

· too few accounts paid as agreed

· too many inquiries in the last 12 months

· proportion of balances to credit limit is too high on revolving accounts

(Note: Three out of these four reason codes don't even apply to the mortgage industry.)

But how can I improve my  credit score now?

The best way to keep your score high is to pay your bills on time, and avoid collections and bankruptcies. If your score is already low, the following is a quick checklist of things that you can do to improve it.

· Pay down any credit card balance to below 50% of the high credit

· Close all accounts that have ever been late.

· Close all but two to three revolving accounts

· Limit the number of inquires made on your file

· Pay all collection accounts

· Write a dispute letter to the repositories on any account that you don't think is yours

Changing your repository file can take time but it's about the only way to raise your score. A score of zero (0) indicates either that no information was found or that there was simply not enough credit history available to generate a score.

(Note: FICO information subject to change. FICO reviewed)

  "The Best Rate Is Not Always The Best Deal!"                               Always Call Sam!                           1-866-SAM-4-YOU  (1-866-726-4968) 

FICO Scores are calculated from a lot of different credit data in your credit report. This data can be grouped into five categories. The percentage breakdowns in the chart above reflect the approximate importance of each category determining your FICO Score.

Calculation Information

Credit Score Issues

If you have damaged credit, I will do my best to point you in the right direction.

Many of my clients have been able take action on their own and in a relatively short period of time to improve their credit profile to make mortgaging possible. For more challenging credit scenarios, the services of a Credit Repair Specialist may be required, but beware. Before you sign up for any repair services, be sure to find out exactly what steps the provider will perform and how much it will cost.

OK Credit

If you have ok credit and feel ready to start the loan process, you will need to document your income and assets.

If you receive a regular paycheck, you will need to provide pay stubs for the past 30 days showing year-to-date income.

You will also need to provide W2s for the last two years and banking and asset statements for a minimum of the last two months. It is also possible that underwriting may ask for more information for processing.

"The Best Rate Is Not Always The Best Deal!"

          Sam Coleman - Michigan Loan Officer License 66789Home Loan Specialists, Inc., Corporate Offices

            135 E Main St., PO Box 132, Manchester, MI 48158                36139 Schoolcraft Rd., Livonia MI 48150

                     Phone 734-428-8944  Fax 734-527-6114   734-524-0400  Fax 734-524-0600

A Division Of Mortgage 1. Inc.

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