FICO Score - "What is a FICO score? How can I change mine?"

Your FICO score is an assigned rating that the major credit bureau assign to your credit. These scores vary from credit bureau company.

The best way to raise your fico score is to allways keep in mind "balance". Not enough established credit will hurt you, so will too much. No balances on your credit cards will lower your score, so will too high of a balance.

There are several ways to increase your fico score. It is best to speak with your mortgage professional and decide which way will increase your score the best. Often simple things can change your score dramatically.

Don't apply for lots of credit either, especially when you are trying to get a home loan. This can negatively impact your score, which in turn could cause you have a higher interest rate.

Be sure to keep a tab on your credit card's limits. Every 6 months you can call and request a higher credit limit often times without an credit inquiry. Keeping your maximum balance high can help your credit scores because a higher limit reduces the amount of credit utilization.

To ensure that your credit remains at the top of its range, don't use any more than 35% of any of your credit cards. This shows the credit agencies that you are able to manage your credit.

Many people have medical collections that are small and on their credit report. Simply paying these off and requesting a letter of 'paid in full' from that creditor (the medical professional's accounts receivable department) and sending it to all three credit bureaus will increase your score.

It is also a good idea to take a look at your credit report peridocially. Contest any discrepancies that you see on your report. It is very common to find accounts that do not belong to you on your report. Make sure that each bureau is notified and have it corrected.

Cleaner Credit Raises FICO Scores - 8 general guidelines for keeping clean credit

1. Minimize credit inquiries;
2. Pay bills early;
3. Pay off revolving cards monthly;
4. Never close a credit account;
5. Dont switch credit cards to get the best rate;
6. Keep the oldest credit account on your credit report;
7. No more than 2 major bank cards;
8. No more than 50% of your revolving credit limit

Minimize credit inquiries

You should only have your credit pulled when you are ready to act. If you are thinking about purchasing a new car, then you should have your credit pulled and purchase the car within two weeks. If you are thinking of purchasing a home, you should pull your credit several months in advance to check for any inaccuracies. Then have your credit pulled again when you are ready to actually make the purchase. Credit inquiries account for 10% of your total credit score. When the time comes to purchase a new home or refinance your existing home, that 10% could make a big difference.

When you get a copy of your credit report, sit down and review it. If you find any inaccuracies, don't wait to try and fix them. One of the biggest mistakes people make is procrastinating. Errors take time to fix. So take the time to fix them. It could mean a huge difference in your credit score.

Another way to get cleaner credit is to pay down high balance credit cards. Ideally you want your balance not to exceed 33%-50% of your credit limit.

If you decide to pay off a credit card do not make the mistake of closing the account. Having a high maximum credit limit with no balance will help your score whereas closing an account will lower your amount of available credit and can damage your scores.

If you're debts are under control now, but want to improve your bad credit history, the most important factor is to make your monthly payments on time. Use pre-addressed envelopes enclosed with your statements to mail your payments and call the company if you don't receive your usual statement. Also send your payment as early as possible if you carry a balance. Most companies calculate interest on a daily basis, so the sooner they receive your payment, the less interest you'll pay.

Your FICO score and loan-to-value - Nearly all lenders, whether conforming or subprime, use your FICO score to determine the loan-to-value that you can borrow to. For most lenders these guidelines are accross the board with the exception of a some niche lenders that may allow slightly higher loan-to-values.

Many lender's guidelines considre credit scores in 20 point intervals. For example, a borrower with a credit score of 599 may have more LTV restrictions than a borrower with a 601, even though there are only 2 points difference. If your credit score is just a few points away from an even 20 point interval (such as 679, 638, or 599) be sure to ask your mortgage professional if the allowed loan to value ratio would be higher with a small score improvement. If the difference is significant you should consider reviewing your credit report and determine the best way to gain a few points on your credit score.

A FICO credit score below 500 will dramatically limit your ability to obtain a mortgage to purchase a home or refinance your existing home loan. The highest loan to value you might expect with a credit score under 500 would 65% before closing costs, meaning you can borrow $65,000 for every $100,000 of property value (the market value of your home).

Borrowers who have low credit scores but have quite a bit of equity can often qualify for Fannie Mae financing. This is due to automated underwriting standards allowing offsetting credit risks based on equity.

FHA will generally overlook fico scores if the overall credit profile justifies that the borrower has improved their financial habits. The most important factor in a FHA loan is mortgage history over the last 12 months.

For those individuals with less than perfect credit, non-conforming lenders allow loans up to sometimes 95% of their property's value.

Certain criteria must be met and these individuals should expect to pay slightly higher charges in closing costs and having a slightly higher note rate. It is also not uncommon for these non-conforming loans to have a pre-payment penalty.

Most lenders take your mid-score, or the middle score of the 3 scores reported by the bureaus. However, some lenders are willing to take the highest of the 3 scores, which sometimes can end up being the difference between a deal or no deal, or a deal and a good deal.

The common cut-off score for 100% financing is a 580 score. There are some programs that vary slightly from this number, and the programs are always changing, so this is not set in stone.

Another factor that is used with your FICO score to determine how much you can borrow (your LTV)is what type of documentation is being used. Full Doc means you are submitting W-2's and pay stubs, or tax returns if self employed, and you are documenting your assets with bank or brokerage statements. A Full Doc loan will allow for a higher LTV than a Stated Doc loan with the same FICO score.

Some lenders out there will even take an average of your 3 credit scores instead of using one particular credit score to determine how high of a LTV, loan to value, they will allow on a mortgage loan. For 2 borrowers they will even add up all 3 credit scores for each borrower together and then take an overall average to come up with one credit score that they will use to determine what mortgage parameters you will qualify for. Therefore, if one partner has poor credit but makes all or most of the money and the other has excellent credit but makes little to no money, by using a combined average for both borrowers it may help the borrowers to qualify for a better loan or a higher LTV. Ask your mortgage professional if you have any questions about how this works.