Fico Scores  (continued)

FICO looks at how long you have had your account, the total number of inquiries and new accounts opened, the number of inquiries and new accounts opened in the last year,and the amount of time since the most recent inquiry. Banks,department stores,employers or landlords make "inquiries" on your credit report every time you apply for credit or a loan at that institution. The FICO scoring model considers inquiries because statistics show that those anticipating financial troubles try to increase the number of credit lines they have available. The FICO model has taken into account certain lender practices that normally would negatively affect your credit report. For instance,if you were interested in buying a car and the dealer agreed to finance you,the dealer may run credit inquiries on
various lenders,which would then show up as numerous inquiries on your credit report.

Beginning the first quarter of 1998, FICO models now treat all inquiries occurring within a 14-day period as one inquiry. In addition, all models will ignore all auto-and mortgage-related inquires that occur within a 30-day period before calculating your score.

What Types of Credit Do You Use?
FICO looks at the diversity of credit you use, whether you use bankcard, travel and entertainment cards, department store cards, personal finance company references,and/or installment loans.

Inquiries - The number of times you have applied for credit in the recent past.

Negative information in your credit report that could impact the FICO score includes bankruptcies,delinquencies or late payments on accounts, collections,
too many credit lines with maximum available funds borrowed, too little credit history (less than five credit lines in the past two years), and too many credit report inquiries.

FICO does not consider your race, color, religion, national origin, sex, sexual orientation, marital status or age.

What actual number is a good score depends on the scoring model, the type of loan,and the lender's acceptable risk level and credit policies. For some models like FICO, the higher the score, the better. For other models, the lower the score, the better. If the score on a borrower's credit report is too low for one
product,it may be acceptable for other products. Likewise, if one lender turns down a request for credit,it does not mean that another one will. For instance,an automobile dealer may accept a lower score than a creditor who offers an unsecured line of credit.

FICO scores range from about 350 to 850 points. With mortgage lenders, there is a pattern for acceptable FICO scores.

A score of 700 and up is considered excellent, and very basic underwriting or information beyond the score will be necessary to get a loan with the most favorable terms. If a borrower gets this score, he or she can get a loan for a mortgage in significantly less time.

Scores between 620 and 650 (average FICO scores fall into this range) indicate basically good credit, but also suggest to lenders that they should look at the potential borrower to assess any particular credit risks before extending a large loan or high credit limit. Lenders may require supplemental credit documentation and letters of explanation before an underwriting decision
is made. If a borrower has a score between these numbers, a mortgage decision will take approximately the same amount of processing time as it took before mortgage companies used FICO scoring.

Borrowers with a score below 620 may find themselves locked out of the best loan rates and terms offered by mortgage lenders, or may have to put up a higher down payment, such as 10 percent. The process will probably be lengthier and, as noted, the terms may be less appealing, but often credit can still be obtained.

Many lenders reserve their most favorable quotes of rates and fees for applicants in the upper FICO score ranges -- 700 and above. Mortgage applicants in the low 600s and below get progressively higher rate quotes and are charged higher loan fees. FICO scores, in other words, often determine what you pay for the money you borrow.