Professionals that serve those purchasing real estate or seeking financing know firsthand how confusing and frustrating credit and scoring can be.
When advising and guiding individuals and businesses towards their goals many of us have heard these questions or something very similar:
The answer to these questions is vast and complicated since credit and scoring is determined by many factors, some of which are cloaked in secrecy.
When credit scores were created, FICO, a bunch of lenders, and the credit bureaus came together to figure out a better way for lenders to predict risk of default when lending. They wanted a more automated system that complied with the laws and made it easier for them to approve more loans allowing a higher volume of individuals to fulfill the American dream of home ownership.
The credit bureaus provided FICO with data from millions of unique credit profiles over varied time periods. FICO studies this information zeroing in on trends and negative outcomes, while learning what symptoms occurred before these delinquencies manifested on credit and lead to defaults.
Each of us begins with a FICO score of 300 if we have open active accounts that have been in existence for a set period of time. From there points are added for varied categories based on our credit profile including debt ratio, average age of credit, payment history, credit reviews, variety of credit, and what scorecard group we are assigned.
Reach out to one of our credit specialists with questions about personal or business credit repair, building, and monitoring.