When a lender evaluates a buyer's creditworthiness, they consider several factors about the buyer's past credit-usage behaviors. These behaviors have been systematized into what is called a “Tri-Merged Residential Credit Report” (T.M.R.C.R.) and is quantified with a scoring system called F.I.C.O. (Fair Issac Company). The score is essentially a merger of reports from three major credit repositories known as:

• Experion/T.R.W.
• Equifax
• Transunion

While F.H.A. and V.A. are not officially F.I.C.O. driven in their credit-approval processing, many lenders are still giving heavy weighting to the scores on these loans. Conventional (F.N.M.A. & F.H.M.L.C.) lenders have been using this scoring system for years.

Listed below is how the F.I.C.O. scores are generally interpreted:

• Scores range from 300 to 850.
• Score under 600 - will most likely need to use loan programs that are not F.I.C.O. driven. Represents extreme concern for underwriting and may result in additional fees, higher rates and/or points, additional down payment required, or even non-approval.
• Score 600 - 620: The underwriter will need to carefully review the application and may result in more fees, points and/or lower loan-to-value ratio.
• Score 620 - 660: This is considered a cautious risk although the buyer does stand a good chance of getting the loan provided he/she can explain any derogatory notations (i.e. late payments) in a plausible manner.
• Score 660 - 680: This is a standard automated approval score.
• Score 680 - 699: This is considered a very good risk by the lender.
• Score 700 - 719: This is considered an excellent risk by a lender and is pretty much a “slam dunk” for approval.
• Score 720 & above: This is considered “Accept Plus” for automated underwriting.

To determine the borrower's credit score, most lenders apportion weights as indicated to the following factors:

• Timely payments - 35%
• Total debt - 30%
• Length of credit history - 15%
• New credit inquiries - 10%
• Amount/type of credit - 10%

A buyer/borrower can get a free copy of their credit report from each repository by mail or online at: www.myFICO.com. They are entitled to one free credit report from each agency once a year. Consumers should review their credit reports once a year, as they often have inaccuracies and old derogatory notations that should be removed from the report.

Here are some methods that a borrower may use to improve their credit score:

• Dispute incorrect information by directly contacting the credit reporting agency.
• If the borrower/buyer has any past-due debt, they can contact the creditor directly and settle the debt. Creditors are often willing to settle past-due debt for less than what is owed and sometimes are even willing to remove the derogatory notation about the debt. If the debt has been sold to a collection agency, the borrower would have to contact the agency.
• Pay down credit card balances, if possible, to less than 1/3 of the available limit.
• Work to show that they have maintained 12 consecutive months of timely payments on ALL of their financial obligations. If they have gone into foreclosure and/or bankruptcy, this will take longer; perhaps three to four years.

Be sure to remember that most of you are NOT credit experts and should always condition any advice you give buyers/borrowers by suggesting that they seek the assistance of a qualified credit counselor. However, these are the basic rules when a lending underwriter is deciding whether or not to approve a loan