Curious how your credit scores is calculated?
I attended a class a few years ago where an expert in credit repair services hosted a session covering the FICO credit scoring system. Alexandra Erlich from Riverstone Law gave a very informative overview of how credit scores are calculated. Most people know that having a good credit score is an important aspect to receiving the best financing terms, but most aren’t fully aware of all the little details behind what drives a great credit score.
What is a good credit score? In the mortgage lending world, a credit score ranges on scale of 350 (lowest) to 850 (highest). This is the range used by credit agencies approved by Freddie Mac and Fannie Mae. There are several online services that allow you to check your own credit score but many of these use a different range. This may result in you believing your score is either higher or lower than the one actually used by the lending agencies. Take caution when selecting which service you use to check your credit score.
A score of 740 is considered perfect from a lending perspective. This means if you have a 740 you are likely to receive the best rates and offers that the lender can provide. Anything above 740 may earn kudos but won’t necessarily open doors to better offers. That said, lenders have many products available to accommodate borrowers with a wide range of credit scores so a buyer’s credit score doesn’t need to be perfect. Of course, the better the score, the more favorable the terms of the lending options become.