The journey to homeownership is an exciting one, but it can be confusing. An important piece of the home financing puzzle is your FICO Score. Your InterLinc Loan Originator will take you through the details during your home loan process, but we’ve outlined a few key components of a FICO Score for your knowledge below.
So, what is a FICO Score? A FICO Score is a three-digit number based on the information in your credit reports. It helps lenders determine how likely you are to repay a loan. This, in turn, affects how much you can borrow, how many months you have to repay, and how much it will cost (the interest rate). [source]
Now that you know the what, let’s dive into the how. How is your FICO Score calculated? Your score is calculated using five categories of creditworthiness. Those are your payment history, your amounts owed, your length of credit history, your credit mix, and any new credit lines that you’ve opened. Let’s look at those a little closer.
First up, your payment history. This part of your score takes into consideration whether you pay your bills on time each month.
Next is your amounts owed. This part of your score is determined by the amount of credit being utilized on your open credit accounts.
After amounts owed is your length of credit history. This is determined by how long you’ve had a credit account open (or multiple accounts if you have more than one), and your usage on those accounts.
Next up is your credit mix. This is referencing different types of credit accounts and loans that you may have under your name.
Finally, any new credit lines that you’ve opened will be taken into consideration when it comes to finalizing your FICO Score.
An important thing to note when it comes to FICO Scores is that they’re unique, just like you! A factor that plays into someone’s score may not be as heavily weighted for your score. For more information on the journey to homeownership, contact your local InterLinc Loan Originator.