Lenders use your FICO score to determine whether you’re trustworthy enough with money to borrow to buy a home – and it’s one of the most important measures of creditworthiness.
But what goes into your FICO score, and what do payment history and debts owed have to do with it?
FICO Scores: The Breakdown
FICO scores are calculated based on your payment history, how much you owe, how old your credit history is, how much new credit you have, and types of credit you have. It’s approximately this way:
- 35% payment history
- 30% debts you owe
- 15% length of credit history
- 10% new credit you’ve obtained
- 10% the types of credit you have
Your payment history reflects whether you pay your credit accounts on time. Creditors report whether you’re late by 30, 60, 90, 120 or more days late.
The total amount of money you owe is referred to as Accounts Owed. But having a lot of debt doesn’t mean you have bad credit. Instead, lenders look at your ratio of how much you owe and how much remaining credit you have.
If you owe $10,000 but were extended $100,000, then you have a low debt ratio.
Are You Buying a Home in Irvine?
If you’re thinking about buying a home in Irvine or any of the surrounding communities, we can help you find one that’s just right for your needs (and your budget).
Call us at 949-385-1684 or get in touch with us online to let us know what you’re looking for.
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