FICO Scoring, (Fair Isaac Company), is an automated rating process for credit reports. The score is meaningless by itself and must be used in conjunction with a validated cut-off strategy which may be different for the various users of the score. For mortgage lenders, the purpose of using FICO scoring is to both speed the mortgage loan review process and to reduce the cost of examining a credit report.
The higher the FICO Score, the better the credit rating. Some of the negative factors that could impact a FICO score include bankruptcies, delinquencies or late payments on accounts, collections, too many credit lines with maximum available funds borrowed, and too little credit history (less than 5 credit lines in the past 2 years). Additionally, credit report inquiries can negatively impact FICO Scores which should be considered when authorizing someone to pull your credit report. The score is dynamic and is calculated at the time a credit file is accessed from the credit bureau. There is no way to "manually" adjust a score in the event that a piece of data in a credit file is inaccurate or not current (i.e. balance, lates, collections, etc.).
Although the idea of credit scoring may seem unfair, it has been known to be an advantage for borrowers at times. For example, if multiple late payments show up on your credit report, the FICO system will rate those delinquencies and the accounts to which they apply. Your score will be higher if the delinquencies occurred on a less significant account, (a gas or visa card as opposed to your mortgage or auto loan). Your FICO score would then benefit you, as a borrower since lenders focus more on the score than the number of late payments that occurred.
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