Why are FICO Scores Important?


  • A Fair, Isaac Credit Score is calculated by a system of scoreboards.  In developing these scoreboards, Fair Isaac uses actual credit data on millions of consumers, and applies complex mathematical methods to perform extensive research into credit patterns that forecast credit performance. Through this process credit scores identify distinctive credit patterns and each pattern corresponds to a likelihood that a consumer will make his or her loan payments as agreed in the future.
  • The best loan pricing is based in large part upon FICO Credit Scores.  FICO scores are based on all the credit-related data in a credit report- not just the negative data.


  These are some of the FICO factors, which determine a FICO score.

Account balances too high


Too few revolving accounts

Too many revolving accounts

Too many accounts with balances

Consumer finance accounts

Too many recent inquiries

Too many accounts opened in the last 12 months

Proportion of balances to credit limit is too high on revolving accounts

Amount owed on revolving accounts is too high

Credit history is too short

Recent delinquencies

No recent non- mortgage information

Number of accounts with delinquencies

Too few accounts currently paid as agreed

Recent public records or collections

Amount past due on accounts

Serious delinquencies

No recent revolving balances

Too few accounts with recent payment information

Number of established accounts


When a credit report is run by a Mortgage Lender they also receive 4 “reason codes” for each score.  These help you to understand why you ranked where you did in the scoring system.


Negative reason codes with high FICO scores may be attributed to

  • Length of credit history
  • New credit
  • Types of credit in use.


10 Most frequent Reason codes:

    1. Serious Delinquency
    2. Public record or collection filed
    3. Derogatory public record or collection filed
    4. Time since delinquency is too recent
    5. Level of delinquency on accounts
    6. Number of accounts with delinquency
    7. Amount owed on accounts
    8. Proportion of balances to credit limits on revolving accounts is too high
    9. Length of time accounts have been established
    10. Too many accounts with balances

Keeping these 10 factors in mind, we can advise you to take certain actions and avoid others to improve your credit scores.


Have credit cards but manage them responsibly.

Timely payments in credit cards and installment loans will raise your FICO score.  A borrower who has managed credit cards responsibly is a lower risk than someone who doesn’t have credit cards.


Don’t close inactive accounts

Closing accounts may actually hurt your score.  Many accounts have a positive rating – when you close these accounts the positive rating stops and your FICO score may drop.


Always consult your mortgage professional to determine what will help or hurt your score before opening or closing an account.  Our “What if” score simulator allows us to determine what will happen with any change to your credit profile.


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