Fe, Fi, Fo, FICO!

Let's talk FICO Score and the GIANT misconception that you need perfect credit to buy a home.

So, what is a FICO Score, anyway? FICO is actually a brand name and stands for the Fair Isaac Corporation which created credit risk scoring back in the 1960's. It's one of the two most common credit scoring models used by lenders, today. The other model, known as VantageScore, was created by the three main credit bureaus: Equifax, Experian and TransUnion. Both of these models use scores ranging from 300-850. The higher the score, the better risk you are to the lender.

So, what does the average person really know about credit scores? Well, the results from an Ipson Survey showed that 43% of those surveyed thought a credit score of 780 was considered "good" and 67% thought you needed to be in the "excellent" range to qualify for a mortgage.

But, what are the facts?? Check out this chart from Experian showing the credit score ranges and how they are ranked:

Now, how do these score rankings translate to a mortgage? Check out the next chart to see the percentage of mortgage loans closed in the different scoring categories.

Surprised? 52.9% of mortgages closed actually fell within the "fair" to "very good" range on the credit scale. This confirms that the general public has a GIANT misconception regarding what it takes to become a home owner. While it's true that borrowers in the Very Good, Excellent, and Exceptional ranges receive the lowest interest rates; in 2017, rates are still HISTORICALLY LOW over all ranges of credit.

If you would love to own your own home but aren't sure of your credit score, OR know you have issues but don't know where to turn; start by speaking to a Realtor®. Your agent can direct you to a licensed loan officer who can not only tell you your credit score, but also advise you on specific steps to take to improve your score in a very short time.

Having the right team on your side can help make your dreams of home ownership a reality. Our team of industry professionals are here to help you get from where you are now, to where you want to be. It's what we do!