Important Factors For Loan Approval Status that Gives You a Stronger Negotiating Angle

What is your FICO?

A FICO score is a credit score developed by Fair Isaac & Company to help lenders determine the risk involved in lending money to any person applying for a loan. It is widely accepted by lenders as one of the most important components helping determine eligibility as well as specific amounts, rates and terms that can be offered. FICO scores range from 300-850. The higher your score, the less risk involved in lending to you. There are approximately 30 factors that influence your credit rating. Some of these factors, such as your payment history, weigh more heavily on eligibility than others.

All factors can be grouped into 5 main categories:

·  Payment History – Do you make your payments on time? Since this determines (on average) 35% of your score, it is certainly in your best interest to make any and all payments on time! Your payment history includes credit cards, car payments, mortgages, student loans and other loan types. Other public records on file, such as a bankruptcy, will be calculated in this group as well.

·  Outstanding Debt – Most people over the age of 18 have debt. The question is how much? All outstanding balances for credit cards, car loans, mortgages, etc. will determine (on average) about 30% of your score. How many of these accounts have balances? For example, if you can possible pay down significantly or pay off credit card debt, you’ll be in much better shape during loan approval.
 

·  Credit History – How long have you been establishing your credit?  Specifically, how long have your current accounts been opened and how long as it been since you used each of them? This usually determines approximately 15% of your score. If no credit history exists, you should begin by establishing credit accounts and be sure to keep them spotless. The less history that exists, the less the loan amount you’ll likely be able to obtain.


·  Pursuit of New Credit – Each time you apply for credit, there is an inquiry into your current credit score. How many inquiries into your credit score are there and how recent were they made? If you recently applied for a MasterCard, May Company account and car loan, you may want to hold off applying for a home loan for a few months. Each inquiry may slightly reduce your Fico score and may portray you as someone overindulging in credit. This usually accounts for approximately 10% of your total score.


· Types of Credit in Use – How many types of accounts are reported for ATM cards, car loans, credit cards, travel accounts, or any other type of account where payments are being made? This will usually determine approximately 10% of your final score as well.

Once your bank is aware of your Fico score they may or may not choose to share this information with you. Assuming they do share your score with you, it is important to remember the higher the score, the more likely you are to obtain a loan. Also, a higher score directly translates to lower interest rates. Over time with home loans, lower interest rates can play a significant role in the total amount you end of saving... See two examples of home loans below and the amount of money you can potentially save while boasting a great fico score.