FICO Score 10: What it Means for Your Mortgage Prospects
Ross Mortgage continuously strives to help our clients reach their homebuying goals while always keeping financial health our top priority! Part of having good financial health is keeping up to date on the latest tips, trends and changes that impact your finances—including your valuable credit score.
This year, FICO has introduced a brand-new credit score, FICO Score 10, that will certainly impact your credit score, but what about your mortgage prospects?
First, it’s important to understand what FICO Score 10 is and how it will affect your score. FICO Score 10, at its core, is a more precise means of grading borrowers.
- The new score places emphasis on more recent delinquencies, impacting those individuals who have failed to pay balances on time in the past two years.
- The score also penalizes users with high “utilization ratios,” meaning an individual that uses 90% of their credit is at a disadvantage compared to one who only uses 50% of their available credit.
- Individuals who utilize personal loans are also at risk of penalization, owing to the fact that such loans are deemed more risky than other financial products.
At the end of the day, a more accurate credit score, like the one provided by FICO Score 10 is a positive. Individuals with great credit will likely see modest increases, while individuals struggling, will have a more honest and truthful score, allowing them to act accordingly and remain financially responsible while improving.
Finally, the question of how this new FICO Score 10 will impact potential homebuyers chances of achieving their goals? The answer: it won’t, at least for now. It will be important to stay current on the topic if buying a home is in your future, as we will likely know long before anything goes into effect. However, as of now, FICO Score 4 will continue to be the main focus for mortgage lenders across the country.
Got questions? Our dedicated team of Loan Officers are ready to help you on your homebuying journey, regardless of where you’re at. Contact us today to get the answers you’re looking for!