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Wednesday, April 11, 2018

What's your credit score?

Not too long ago, I was working with some folks who wanted to lease their property. Before a landlord accepts a tenant, they ask for two things - references and the potential tenant's FICO (or credit) score. As agents, we need to run the credit score with a third party that solicits the information from Experian, TransUnion and Equifax. After the recent data breach incident with Equifax, citizens are pretty aware of the types of sensitive information that these agencies collect.

There are various ways of calculating credit scores. The FICO score (the name comes from the corporate name: Fair Isaac Corporation, who developed the score) is the most commonly used type of credit score in the US. 

FICO scores are also used by mortgage lenders to determine the possibility of whether a borrower is a good risk for lending. If you want to get any kind of financing (appliances, cars, etc.), this three-digit number is one of the most important numbers of your life. It signifies your creditworthiness and it can make or break your ability to get a loan. Credit scores generally range from 300 to 850, with higher credit scores being the best of all.

As of April 2017, 20.7 percent of Americans have a FICO score above 800, according to data from FICO. This makes a record high percentage of people with credit scores over 800 and correlates directly to lower delinquency rates.

Since payment history makes up 35 percent of the credit scoring calculation, there's a strong relationship between having a high credit score and a lower amount of late payments.

After we get a credit report, we need to share it with the landlord and then they make a determination, whether they want to rent the property to these particular tenants. A great score is anything over 750. A lousy score is anything less than 700. The highest score I've ever seen was 878 -- impressive. I won't tell you the lowest.  Let's just say, my landlord client had zero interest in renting to those particular people. 

With the recent financial collapse, people's credit scores took a hit and renting became really challenging for folks, who had lost their homes. Tenants were having to pay 6-12 months rent upfront in order to get the property.

That's actually what happened with this recent situation. The potential tenants had a credit score in the low 600s. My clients were unwilling to rent to, what appeared to be, wonderful tenants.  They just happened to have a poor FICO score. Eventually we were able to secure the lease -- but the tenants had to pay for the full year of rent up front. Ouch.

There are tremendous benefits of having a credit score over 800.

You're more likely to have your applications approved. I recently rented a car - my score is good and it was smooth sailing -- they were very excited to lease to me.

You'll qualify for lower interest rates. Your credit score helps determine the interest rate on loans. Having an 800 credit score will allow you to qualify for lower interest rates and save thousands of dollars over the life of your loan. This can be a significant difference with mortgage interest. 

Anyone who manages their credit properly can get an 800 credit score. Here are some tips from the experts:

Pay everything on time.

Maintain lower credit card balances. People with best credit scores use less than 10 percent of their credit limits.

Avoid too many credit checks. Each time you make an application that requires a credit check, a hard inquiry is placed on your credit report. These hard inquiries are 10 percent of your credit score.

Monitor your credit and act quickly to clear up errors. There are sources where you can request your score for free. After the Equifax debacle, I signed up for LifeLock -- they send me my credit score every month. But some other sites to consider:,,,, and If you see something wrong, get it fixed immediately.

Any negative information will eventually age off your credit report. It may take a while, but you too can get your score back over 800.

So what's your credit score -- it's a number to remember!

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