How to improve Fico scores for your loan:

These are mysterious three digit numbers that determine your credit profile and ratings. These scores are used by lenders to qualify you for a loan, and at what interest rate and terms. These scores are computerized models of your credit history and payment behavior. Today credit scores are the most vital numbers but are least understood by many borrowers.  Many borrowers do not know their credit scores, which is the first thing you should do if you are looking to get any type of loan. There are many services available who provide these scores for a small charge. Fico scores were originally developed by Fair Isaac company and have now become a benchmark models of a borrower’s risk profile. Please read more below..

Each of the three major credit bureaus are licensed by Fair Isaac to run individual credit data through its proprietary statistical models. They use their own version of names for e.g. Beacon uses Equifax, Empirica is Trans Union,and Experian is Fair Isaac model. Fico scores range between 400 to 800 and are graded by lending industry as given below in this table

Derogatory Information : According to credit profiles as developed, by credit bureaus,  most recent two year credit information is weighted higher than information a few years older like late payments,charge-off, bankruptcy, repossession etc. Therefore is very important to make sure any major credit problems in the last 2 years will affect your loan much strongly.

Outstanding accounts :The larger the total outstanding of debt the higher the risk and lower the scores. Reducing account balances reduces these scores. Therefore larger balances are considered as much riskier loans. When applying for a mortgage consider lower your debts and paying off smaller debts boosting your credit scores.

 Credit history legend : The longer the credit history is established and the number of accounts the better the scores, versus a new credit profile and recently opened accounts. Therefore borrowers with longer profiles are considered less riskier than those with little or no history.

 Use of credit: The lesser the use of credit card and other forms of debt the better the scores will become. That means try keeping fewer account balance on all your outstanding credit cards. 

 Few Inquiries: The lesser the number of inquiries in the last 90 days the better the chances for a favorable loan approval. Always try to keep loan inquiries to minimum. Do not apply for a number of credit applications and that will only lower your chances of getting that loan, that you want and create what is called bad credit risk which is what it does.