Your FICO Score And Your Refinance Loans

Posted: 31 Jan 2008 | Categories: Loans

You may have heard of a FICO score, but if it didn’t relate to any of your favorite sports, forgotten all about it. But if you have ever taken out a formal loan, you have your very own FICO credit score, which will let future lenders know how much of a risk they will be taking by lending money to you. A low score will label you as a high-risk borrower, and if you have one and want to refinance your home, you can expect to be hit with a high interest rate.

But you can take matters into your own hands when it comes to raising your credit score. If you wait to apply for refinance loans until it is improved, you will save a considerable amount of money over the life of your refinance loan. How can you begin the process of lifting your FICO credit score and lowering your refinance loan rates?

The Fair Isaac Corporation is the mysterious entity behind the FICO anagram, and the company actually responsible for assigning your score. They base your score on all the details of your credit history, and then assign a numerical score representing your creditworthiness.

How Your FICO Score Is Assigned

Fair Isaac gets your credit information form the three major credit reporting bureaus, Experian, Trans Union, and Equifax. They will assign you three different scores because the information form each of the credit bureaus will be slightly different. The first thing you should do before applying for a refinance loan is get copies of three of your credit reports and scores. An error in any one of your reports could lead to an unjustified lowering of your score, and you should take the steps to repair the damage.

Your credit scores will also reflect the amount of time you have been a debtor, how much of your existing credit lines you have used, and whether any of your accounts have been turned over to collection agencies or written off.

If you uncover any errors in any of your credit reports, you should immediately send a separate letter for each of the mistakes to the credit bureau/s involved, and include documentation to support your complaint. The credit agencies will review your information, and if they agree that there are mistakes, will correct your reports and adjust your scores. Cleaning up your credit reports is essential before applying for your refinancing.

Other FICO Score Raising Options

There are other things you can do to raise your Fair Isaac and Co(FICO) scores, but they will take some time. You can begin immediately to make your bill payments on time; you can cut back on your credit card use; and you can pay off and close as many accounts as possible. The most important of these suggestions is to begin paying your bills on time, because 35% of your FICO score is calculated from your payment history.

You should try to pay down as much as you on any credit cards which are approaching their limits, because that will also make a significant improvement in your FICO score. It may take six months or longer for all the changes in your bill handling to be reflected with a better score, so don’t start until you are ready to see the effort through.

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Article Author :Jonathan_Andrew