Score Planner tool offers path to better credit
Kenneth R. Harney
WASHINGTON — If you're consiering buying a home in the months ahead, you likely know how important your FICO credit score will be in getting a mortgage.
And you probably know the score range you'll need for the type of loan you want — somewhere in the low- to mid-700s for a conventional mortgage eligible for sale to investors Fannie Mae or Freddie Mac, or a score in the mid- to upper 600s for a Federal Housing Administration (FHA) insured loan.
The minimum score for approval also will depend on your debt-to-income ratio, down payment and other factors in your application.
But let's say your FICO score isn't quite where it needs to be. The question then becomes: How do you push your score high enough for a mortgage?
There are dozens of websites that can offer "credit repair" suggestions and scores, but none has access to proprietary FICOscore algorithms. As a result, they're not reliable.
That's all about to change. FICO has created a new prescriptive Score Planner tool that the company says will allow you to improve your score within a set time period by following a customized, detailed set of steps.
Although it's only in the pilot stage with one of the three national credit bureaus, Experian, FICO officials said that it should become widely available in the months ahead.
How does it work? FICO prepared an example based on a hypothetical consumer's credit report: The borrower has a sub-par 623 score but needs a 675 or higher for a mortgage at an affordable interest rate. As with all the Score Planner's scenarios, the homebuyer sets a deadline — anywhere from a few months to as long as a year — to achieve a desired score.
In this case, the buyer opted for a ninemonth time frame. These tips are among those recommended by Score Planner:
• Stay current on your payments so that your most recent delinquency ages to 19 months.
• Do not open any new accounts so that your most recently opened account ages to one year and two months.
• Do not open any new accounts so that your average length of established credit history ages to four years and three months.
• Reduce your total revolving credit-card balances of $7,250 by $805 each month for nine months.
• Continue to make monthly loan payments on time to reduce the total installment-loan balance of $163,780 that you owe.
Every individual's credit report is unique, but by paying down debts — such as credit-card balances — "substantial" improvements in score are feasible.
To access the Score Planner pilot on Experian, visit: www.experian.com/ consumer-products/ credit-score.html. Note, however, that the FICO planner is part of a package that will cost $4.99 the first month and $24.99 per month thereafter, cancelable anytime.