Mortgage Knowledgebase

FICO FAQs (Frequently Asked Questions)

Q: What is a credit score?

A: A credit score is an indication of your credit history and assist in measuring your ability to repay a debt in the future.

Q: Are FICO scores unfair to minorities?

A: No. While FICO scores are the most commonly used credit r"lsk scores in the US, lenders may use other scores to evaluate your credit risk. These include:

  • Application risk scores. Many lenders use scoring systems that include the FICO score but also consider information from your credit application.
  • Customer risk scores. A lender may use these scores to make credit decisions on its current customers. Also called "behavior scores," these scores generally considerthe FICO score along with information on how you have paid that lender inthe past.
  • Other credit scores. These scores may evaluate your credit report differently than FICO scores, and in some cases a higher score may mean more risk, not less risk as with FICO scores. When purchasing a credit score for yourself. make sure to get the FICO score, as this is the score most lenders use when making credit decisions.

Q: Does my FICO score alone determine whether I get credit?

A: No. Most lenders use a number of facts to make credit deci­ sions, including your FICO score. Lenders look at information such as theamount of debt you can reasonably handle given your income, your employment history, and your credit history. Based on their perception of this information, as well as their specific underwriting policies, lenders may extend credit to you although your FICO score is low, or decline your request for credit although your FICO score is high.

Q: How fast does my FICO score change?

A: Your FICO score can change whenever your credit report changes. But your score probably won't change a lot from one month to the next. In a given three-month time period, only about one in four people has a 20-point change in their FICO score.

While a bankruptcy or late payments can lower your FICO score fast, improving your FICO score takes time. That's why it's a good idea to check your FICO score 6-12 months before applying for a big loan, so you have time to take action if needed. If you are actively working to improve your FICO score, you'd want to check it quarterly or even monthly to review changes.

Q: How can mistakes get on my credit report?

A: If your credit report contains errors, it is often because the report is incomplete, or conta'ins information about someone else, This typically happens because:

  • You applied for credit under different names (Mary Jones, Mary Jones-Smith, etc)
  • Someone made a clerical error in reading or entering name or address information from a hand­ written application.
  • You gave an inaccurate Social Security number, or the number was misread by the lender.
  • Loan or credit card information was inadvertently applied to the wrong account.