An individual’s credit score is a number that ranges from 850 (perfect) to 300 (very poor) and is used by financial institutions to judge the level of risk of a borrower. Lending institutions use credit scores to determine interest rates and credit limits for a borrower. A borrower’s credit score is based on a number of factors within a credit report. By far, the most popular credit score is FICO, which is determined by the Fair Isaac Corporation. The three major American credit reporting agencies (Equifax, Experian and Trans Union) all use variations on this scoring formula under different names, the best-known of which are the Beacon score and the Emperica score.

Determinants of a FICO Score --

• On time (or late) payment of financial obligations and debts – 35%

• Ratio of current revolving debt (ex: credit card balances) to the total available revolving credit (ex: credit limits) – 30%

• Length of time of credit history -- 15%

• Types of credit used (installment, revolving) –10%

• Credit levels obtained in past – 10%

(Note: Current income and employment history do not influence a FICO score. Other factors can affect a borrower’s FICO score. Any outstanding balance due to a tax lien, court judgment etc. will negatively affect the score. Excessive credit card accounts or consumer finance accounts will similarly lower the FICO score. Finally, lots of recent credit checks will lower the score.)

California Bad Credit and FICO

If you are below a 560 FICO score, you are considered to have bad credit. Bad credit in states such as California makes it difficult to acquire mortgage loans that are typically in excessive of $100,000. Private money lenders are often the only lenders that will loan to borrowers whose FICO score is under 600. However, for borrowers with a sub par FICO score, there are companies that will work with you to improve your FICO score.

Corey Senn is a Senior Partner with Bad Credit Lender, a California based private lender that specializes in hard money loans and bad credit loans. Located in La Jolla, California, Bad Credit Lender provides competitive private California bad credit loans, bad credit home loans, and bridge loans. In addition, Corey is one of the main contributors to the California Home Mortgage Loan web blog.

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