FICO reveals behaviors behind sterling credit scores

I just came across an interesting article about how tight mortgage lending standards have dashed the hopes of many would-be homebuyers. Thee developers of the most popular credit risk score today revealed some habits and behaviors of “high achievers” with FICO scores above 785.

More than 50 million people — about a quarter of all people with credit  scores — are considered high achievers and tend to have “strikingly  similar” credit habits regardless of background or life experience, San Jose, Calif.-based Fair Isaac Corp. said.

Some of these habits are fairly predictable: They keep low  revolving balances relative to their available credit, don’t max out  their credit cards, and consistently make payments on time.

Ellie Mae Inc., which provides mortgage origination software to lenders, reports that  the average FICO score for mortgages approved in September was 750,  with borrowers making down payments averaging 22 percent, having  front-end debt-to-income ratios of 23 percent and back-end DTIs of 34  percent.

Those whose applications were denied had an average FICO  score of 704, with borrowers willing to make down payments averaging 12  percent. The average front-end debt-to-income ratio was 27 percent; the  average back-end DTI was 44 percent.

The average FICO scores for  purchase mortgages eligible for purchase and guaranteed by Fannie Mae  and Freddie Mac was 762 (compared with 729 for denied applications), while  FICO scores on FHA-backed purchase loans averaged 701 (compared with 665  for denied applications).

The FICO score does not take into account attributes such as race, gender, age, marital status, salary, employment history or address, the company said. FICO’s consumer website, myFICO.com, offers tips and tools to help people make decisions about their credit.

“Because a high FICO score is typically achieved over time and takes into account dozens of variables, there are no ‘quick fixes’ for rapidly improving scores or repairing bad credit,” Sprauve said.

“Practicing good credit behavior consistently over time and regularly checking your credit report for errors can be instrumental for achieving a high credit score, which can lead to better loan terms and lower interest rates. Achieving good credit health is a long-distance event, not a sprint.”