Understanding Your FICO Score So You Can Buy a Home

So often I hear from first-time homebuyers that they are either unsure or downright scared of their credit score and what it might be.

Well, in this article I want to demystify it all for you so that we can chase away that uncertainty and fear away with knowledge. We’re going to go through what is your FICO credit score, what it’s made up of, and what you need to know about it so you can buy a home.

First, what exactly is a FICO credit score?

Your credit score is simply a number between 300 and 850, used by lenders that scores your “trustworthiness” and ability to financially repay money loaned to you. The higher your number, the more likely you are to repay, based on a variety of factors – we’ll go over exactly what’s in your credit score, below.

FICO is a nickname for Fair Isaac Co., a company that collects, puts together and calculates your financial data and credit score. There are other companies that do credit scoring but Fair Isaac is the most well known and used by all the large lending institutions.


Your FICO score may differ – and usually does – from many of the other credit scoring services. So, if you use Credit Karma or any other credit monitoring services, you can’t rely 100% on the scores they’re providing to you when it comes to qualifying for your mortgage.

How is your FICO score calculated?

Check out the graphic below from FICO on what makes up your score. Here’s how it breaks down:

30% is based on the amount you owe (debt) compared to how much credit is available to you. For example if you have a credit card with a $1,000 credit limit and you owe $500 on it, you’re using 50% of your available credit. You can increase your FICO score by decreasing your credit utilization to 30% or below.

35% is based on your Payment History. How many late payments do you have? Late payments that get reported on your credit can linger there and ding your score for up to 7 years! So, always, always pay your bills in full and on time.

10% is based on your Mix of Credit Accounts. This part of your score depends on the variety of credit accounts you have, including a car loan, credit card, home mortgage. Those with a healthy mix score higher.

15% is Length of Credit History. Having a long, reliable history of modest credit use and healthy credit behavior will result in a higher score here.

10% is based on New Credit. Your score can get dinged here if you have ‘too much’ new credit or credit that may indicate financial problems, like pay-day loans. This is why I’ll tell you that during the time you’re applying for a mortgage don’t go out and buy a bunch of new furniture and stuff on credit.

FICO Score Breakdown

Curious what your real FICO score is? Get in touch and I’m happy to run your credit for you at no charge. I even have a ‘what-if’ tool that can calculate how changes you can make will boost your score and save you money on your mortgage.

I hope this has been helpful. Please reach out if you have any questions!