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Barbara Altieri's Blog

By Barbara Altieri of RealtyQuest | Agent in Shelton, CT

Today’s Low Mortgage Rates + High FICO Score = Winning Combination!

How Your FICO Score Affects Your Mortgage Payment

Potential buyers can get a great rate on a mortgage right now.  Rates have dropped slightly in the last week.  BUT, keep in mind that your credit score will affect the interest rate you are able to get. 

Take a look at this example, based on a national mortgage average of $250,000.

As you can see, your FICO score, the most commonly used measure of credit created by Fair Isaac Corporation, affects the interest rate you can get and subsequently the amount of your monthly payment. 

What number should you aim for? FICO scores range from 300 to 850, but only 13% of consumers have scores above 800. The median score is 723, and many lenders require a score of 760 or higher to get the best interest rates.

Here's how the FICO is calculated.

•· Pay your bills on time.  More than a third of your score is based on payment history.

•· How much you owe makes up another third. Your "credit utilization" ratio, which is the percentage of your credit limit that you've actually used, is more important than the amount of credit to which you have access.

•· The length of your credit history accounts for 15% of your FICO score. Getting a lot of new credit within a short time span can hurt your score because it lowers the average age of your accounts.

•· About 10% of your score is based on new credit. If you open a bunch of new accounts, lenders worry that you might go on a borrowing binge. Don't apply for new credit within three to six months before applying for a mortgage.

•· 10% of your score depends on the types of credit you use. Your experience with major credit cards and store cards, on which you control how much you charge and pay off each month, carries more weight than a car loan or mortgage which has fixed payments.

Don't know your score? Under the Fair and Accurate Credit Transactions Act, you can obtain one annual free copy of your credit report. Visit www.annualcreditreport.com  for more information.

Mortgage rates have dropped slightly this week.  Don't let your FICO drop!

Barbara Altieri, REALTOR®
Certified Short Sales Specialist
Real Estate Sales and Services
Darien, CT
203-656-4993 x 29

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