Lyon Financial

LyFi Pool School 102: Understanding FICO

FICO

When you’re ready to finance a swimming pool or apply for a mortgage, it’s an exciting time. Whether it is your first pool or your fifth house, you are embarking on a process with a distinct beginning, middle, and end.

While our pool financing account managers take you step by step, it’s always beneficial to be informed. Like anything else, when you’re prepared, you will feel more confident.

What Is a FICO Score?

A FICO score (which ranges between 300 and 850) is a type of credit score created by the Fair Isaac Corporation, a foremost analytics software company. Along with information about your income, your debt, and your credit history, this grade provides a risk assessment factor that gives lenders some insight into whether or not you will pay back what you borrowed.

According to Investopedia, the five areas lenders use to assess credit worthiness are:

  • Payment history
  • Current level of indebtedness
  • Types of credit used
  • Length of credit history
  • New credit accounts

The higher your score, the more favorable options to which you’ll be entitled. Understand that it’s not always all cut and dry. While the mortgage industry is known to be especially stringent, your desire to borrow money doesn’t rest solely on this one score. Other key factors include:

  • Your income
  • How long you’ve been at your present job
  • The type of credit you are requesting

How is a FICO Score Figured?

While the Fair Isaac Corporation periodically changes how they calculate scores, as of this writing and according to Investopedia, the Fair Isaac Corporation weighs each category differently for each individual. However, in general, payment history is 35% of the score, accounts owed is 30%, length of credit history is 15%, new credit is 10% and credit mix is 10%.

Ways to Maintain a Stronger FICO Score

These points are common-sense ones, but bear repeating:

  • It is good to have a strong (and long) credit history on a small array of credit cards. It is not good to randomly apply for all kinds of cards.
  • Don’t consistently run your cards up to their limits. You may use your card for all monthly expenses to earn an incentive like cash back rewards, but it shouldn’t be at the expense of consistently squeaking in just beneath your credit ceiling.
  • Always, as in always, pay on time. There are of course grace periods that some credit companies extend. They may still charge a late fee but won’t necessarily report the missed due date to the credit reporting agency. However, those fees mount up quickly and it’s easy to start slipping down that slope. If things are tight and your monthly payment date is the week before your pay day, contact the credit card company and negotiate a different due date. When you explain that an earlier date will give you a little breathing room and allow you to consistently pay on time, the odds are they will accommodate you!

High Risk Borrowers

There are times when a financial organization may consider you a high risk if your credit is considered borderline or perhaps insufficient. There’s good news in there though.

  1. Your debt to income ratio is an evaluation factor. In the event you are turned down, the creditor assessing your creditworthiness is doing you a favor. If you already have too much debt, the last thing you want to do is take on more if your income does not support that extra weight. Although the lender is protecting their interests, they are also protecting yours.
  2. Secondly, a poor credit assessment can be resolved. It might take some time but paying down your debt or obtaining assistance with consolidation is a project you can take on and accomplish. If a less than average score has kept you from doing the things you want, getting over that hurdle will be incredibly gratifying.

Your FICO Score

At Lyon Financial, we have been providing pool and home improvement financing solutions since 1979. That accounts for an almost impossible to calculate number of backyard pools, gazebos, tiki bars, outdoor kitchens, and sparkling spas!

What sets us apart is that we see the people behind all those al fresco entertainment centers. We work with you to help determine the best financing solution to suit your particular needs.

When seeking a loan, you’ve probably heard the expression that your credit score got “dinged” or there was a “hard inquiry” on your credit. That can happen when a potential lender begins their assessment of your credit.

You must therefore exercise caution with online lenders in particular. They advertise they will shop around to get you the best rate your credit history allows. They promote that all you have to do is sit on your couch and wait for the results to come in and “Voila!” you’ve got your loan.

What you don’t see behind the scenes is that they are “shot gunning” your credit. After you fill out the application, they submit it to every lender in their arsenal. Each one of those lenders checks your credit. Each one of those unnecessary “dings” can potentially add another shotgun hole in your FICO.

When it comes to maintaining your FICO score, you want the assurance that the right resources are on the job, working on your behalf.

At Lyon, we personally assess your application. We then look at our cadre of superior lenders to determine the one that best suits your needs and your credentials. We closely review their suitability and then connect you. After that, we take you step by step through the process.

Read more about how the Lyon Financial Pool Loan Process works in this installment of LyFi Pool School.

Lyon Financial loves backyard pools and everything that makes your outdoor entertainment center unique. We also love the difference we can make for your family by providing something that puts years of memories within reach. Call 877-754-5966 for more information about our personalized financing solutions.