1st Florida State Mortgage Corporation

What is a FICO Score?

A FICO score is a credit score developed by Fair Isaac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills. Fair, Isaac began its pioneering work with credit scoring in the late 1950s and, since then, scoring has become widely accepted by lenders as a reliable means of credit evaluation. A credit score attempts to condense a borrowers credit history into a single number. Fair, Isaac & Co. and the credit bureaus do not reveal how these scores are computed. The Federal Trade Commission has ruled this to be acceptable.
Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance. Developing these models involves studying how thousands, even millions, of people have used credit. Score-model developers find predictive factors in the data that have proven to indicate future credit performance. Models can be developed from different sources of data. Credit-bureau models are developed from information in consumer credit-bureau reports.
Credit scores analyze a borrower's credit history considering numerous factors such as:

• Late payments, delinquencies, and bankruptcies: Past inability to pay on time will hurt your chances of getting credit in the futures. More recent problems will be counted more heavily than those in the past.
• The amount of time credit has been established
• The amount of credit used versus the amount of credit available
• Length of time at present residence
• Employment history
• Negative credit information such as bankruptcies, charge-offs, collections, etc.

There are really three FICO scores computed by data provided by each of the three bureaus––Experian, Trans Union and Equifax. Some lenders use one of these three scores, while other lenders may use the middle score.
Frequently Asked Questions (FAQs)
How can I increase my score? While it is difficult to increase your score over the short run, here are some tips to increase your score over a period of time.

• Pay your bills on time. Late payments and collections can have a serious impact on your score.
• Do not apply for credit frequently. Having a large number of inquiries on your credit report can worsen your score.
• Reduce your credit-card balances. If you are "maxed" out on your credit cards, this will affect your credit score negatively.
• If you have limited credit, obtain additional credit. Not having sufficient credit can negatively impact your score.

How do I interpret my score?
Your credit score provides a good summary of how lenders will view your credit profile; however, it is only of the factors that a lender may consider. Lenders generally look at three areas:

• Credit reputation: your credit score and history
• Collateral: your loan amount relative to the home or auto value
• Capacity to pay: your income, debt, cash reserves

As a result, a lender could prefer a lower score borrower with favorable factors over a higher score borrower with negative factors.
FICO scores range from the low 300s to about 900. The following table will give you a general idea of what your score tells lenders, but remember there are no set rules. Different products and lenders use different guidelines for what is an acceptable score. Also, there will usually be small differences in the scores calculated by each of the three credit bureaus. Lenders will often use the middle of your three FICO scores.

Above 719	Excellent Credit
680-719	Good Credit
620-679	Lender will take a closer look at your file
585-619	Higher risk, you will not be eligible for best rate and product
Below 585	Credit products may not be available; Lenders will need to consider other information in your application.