To qualify for a good loan, you have to have a fairly solid credit rating. More specifically, though, lenders will want to take a look at your FICO credit score report. What exactly is a FICO score and how does it differ from your conventional score?

FICO Credit Score Defined

The Fair Isaac and Company (FICO) was an organization established in 1989. It developed a system for determining one’s credit score. Today, the system is used by most major banks and institutions when determining a home buyer’s eligibility for loans. Basically, the system gathers data from credit reporting agencies. Then it applies a specifial algorithm to calculate a final score.

Aside from mortgage loans, Banks also use FICO scores to determine someone’s eligibility when opening a savings or checking account.

For the most part, home buyers don’t need to concern themselves with the particular algorithm. It’s best to just think of a FICO score as more or less the same as your credit score. By raising the latter you will automatically raise the former. [Read more…]