I thought this short article would be helpful for investors unfamiliar with credit scores. I like the note, but I don’t like the title of the article “Good Credit Is Step One For Buyers�. For investors, step one is finding potential deals and in many cases, credit doesn’t come into play at all because we are doing non-traditional creative deals. One of the attractions to real estate investing is the fact that you can invest successfully even if you have a terrible credit score.
Having said all that, I still think it is important to be familiar with what a credit score is, what influences it and how to improve your score.
Good Credit Is Step One for Buyers
Potential home buyers inevitably must confront their credit scores.
Here’s a primer for those who have never faced this issue before:
A credit score, commonly known as a FICO score, is derived from a history of taking on debt and paying it off.
FICO scores range between 300 and 850, with the highest reflecting the best credit risk. The median FICO score nationally is around 720-723, according to Fair Isaac, the company for which FICO scores are named.
Except for a first-time buyers or those who have a large down payment, lenders will want to see a FICO score of 680 or higher, says Robert Satnick, chairman of the California Mortgage Bankers Association.
To get their FICO score, potential home buyers can go to Myfico.com, a unit of Fair Isaac. Obtaining a FICO score and a credit report from one of the three credit bureaus that collect this history costs $15.95; the combination of all three scores and the FICO report costs $47.85.
The credit factors that determine the score are: a person’s payment history (35 percent of the score), how much they owe (30 percent), the mix of credit and installment loans they have (10 percent), the length of their credit history (15 percent), and whether they have applied for new credit recently (10 percent).
Source: The Associated Press, Alex Veiga (07/21/2008)
Posted by Carter Brown
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