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REALTOR®: REALTORS® Learn How to Improve FICO Score

Wednesday, March 4, 2009

These days, if you want to achieve the American dream of homeownership, it's best to make sure you have a good credit history and FICO score.
FICO, the most widely known type of credit score, is a credit score developed by Fair Isaac Corporation. It is used by many mortgage lenders that use a risk-based system to determine the possibility that the borrower may default on financial obligations to the mortgage lender.

"The FICO credit score predicts the statistical chances of consumers being 90 days late or in default of a loan. The higher your score, the less the odds of having you defaulting on a loan," Certified credit specialist Julie Macc told REALTOR® and affiliate members of the Silicon Valley Association of REALTORS® at a Palo Alto District tour meeting on Friday.

Your credit score is used by lenders in determining whether or not to extend credit to you, the interest rate and terms of the loan. The lower your score, the less likely you will be approved for loans. If you are approved, you may have to pay a high interest rate if your score is not high enough. FICO credit scores range between 300 and 850. Ratings are as follows: Excellent: over 750; Very Good: 720 or more; Acceptable: 660 to 720; Uncertain: 620 to 660; and Risky: less than 620. Your credit score is determined by the following factors: payment history (35%), revolving debt ratio (30%); length of credit history (15%); new credit and inquiries (10%); and type of credit used (10%).

Macc pointed out that "credit has no history"; a 700 credit score could go down 160 points overnight by one wrong move. Here are some tips on how to improve your credit score, which Macc asked REALTORS® to share with their clients:

1. Pay your bills on time.
The most important thing you can do to keep your score high, or improve upon your score is to make your payments on time. Late payments will negatively impact your score.

2. Lower your total debt load.
If you currently have a significant amount of debt, stop borrowing and work toward lowering the balance. Consider how much of your available credit is utilized. Maxing out one or two credit cards, or keeping very close to their limits, will negatively impact your score. It's best to spread your debt among several credit cards than loading a single card close to its limit.

3. Keep old accounts open.
Length of credit history is another important credit score factor, so keep older accounts in good standing open. It can hurt your score more to close an old account than to keep it open. Use these accounts sparingly, so they remain active and in good standing.

4. Open new accounts with care.
Opening new accounts can hurt you since this could show a pattern of you constantly looking for credit. Don't open credit accounts you don't intend to use.

"Right now, every point is really precious, especially in this economic climate," Macc told REALTORS® and affiliates of the local trade association.


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

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