Residential Realty Northwest
Residential Realty Northwest
Mary G Johnson, Residential Realty NorthwestPhone: (503) 313-0688
Email: [email protected]

Mortgage Qualifications: FICO Score

by Mary G Johnson 02/21/2021

Image by David Pereiras from Shutterstock

Your FICO score is a key factor used to determine if you qualify for a mortgage. The Fair Isaac Corporation (FICO) is the creator of the most common credit score used by home loan providers. The algorithm used to create your score is a closely-guarded industry secret. But in general, it factors in your payment history, debt burden, length of credit history, and recent applications for credit. Your FICO score is powerful but there are things it cannot account for.

It does not indicate how much you can afford.

It does not reveal how much you have saved up for a down payment.

It does not understand your ability to budget.

It does not display your current bank account balances.

What does it do?

Your FICO score tells you (and your potential lender) how you have handled credit over the length of your credit history. Scores range from 300 (poor) to 850 (excellent). The primary factors that can hurt your credit score are late-payments and the debt-to-credit ratio.

Late Payments

Make your payments on-time every month especially if you are hoping to secure a mortgage. The more on-time payments you have the better your score will be. In some cases, on-time payments can dilute the impact of late-payments in your credit history. Newer incidences can be more detrimental to your score than older late-payments. Payments that are received 60, 90, or 120 days late count more against you than those that are late by over 30 days.

Credit Utilization

The total amount you owe is a consideration but the relationship between how much you owe and the credit available to you weighs more heavily when it comes to determining your FICO score. Another term for this is your credit utilization. Your debt-to-credit ratio is a measure of how much of your available credit you are using within a 30-day window. The higher the ratio of debt compared to available credit, the more likely you are to have a lower FICO score.

For instance, let’s say you and your partner both owe $1000 on credit cards. Your available credit is $1500, making your credit utilization two-thirds or 66 percent of your available credit. Your partner’s available credit is $4000, making their credit utilization 25 percent of their available credit. If all other factors are equal, your partner’s FICO score will appear higher. 

Ask your real estate professional for recommended financial resources in your area.

About the Author
Author

Mary G Johnson

"As a full-time realtor, along with my team at Residential Realty NW, I bring a full range of knowledge and experience, so that I can be both a trusted resource for both buyers and sellers of Portland properties. My professional success comes from my belief in working hard, being consistent with follow-through, knowledge and excitement about the industry, and building a strong honest relationship with the clients I represent. My skills in the art of marketing, vision, and negotiations will guide us through every transaction".

Sincerely,

Mary G Johnson   

Experience: 

Residential Real Estate Broker, SRES, PMAR Master's Circle, licensed in Oregon & Washington  

In-home Design Consultant, Calico Corners, Portland, OR

Merchandise Floor Design/Stage, Wight's Home and Garden, Seattle, WA  

Owner MGJ Media/Advertising, Boise, ID  

Professional Associations:

National Association of Realtors

Portland Metro Association of Realtors Masters Circle

Member Senior Real Estate Specialist

Regional Multiple Listing Services

Oregon Association of Realtors

5 Star Professional Award