What Does a FICO® Score Actually Mean?

by Chris on May 2, 2011

Most landlords know that 500 is bad, and 700 is great.  Most are happy to see 600.  But do you know what your tenant’s FICO® score really means?

There is a lot of different credit data that goes into a FICO® calculation:

Payment History

For the general population, this component is the heaviest weighted. A tenant’s score will take into account liens and judgments, as well as the overall amount and length of time of any delinquencies.

Amounts Owed
 
Also given significant weight are the number of accounts, the proportion of balances to credit lines, and the proportion of balance to original loan amounts.

Length of Credit History
 
Here, credit is evaluated based on the age of accounts.

New Credit
 
A tenant’s credit score will also be factored on the number of recently opened account, and that proportion to existing accounts.  The number of recent credit inquiries is also evaluated, along with re-establishment of positive credit history following past payment problems.
 
Types of Credit Used

The number and prevalence of various types of accounts–credit card, retail, mortgage and the like, are evaluated relative to one another.

When developing a tenant credit score, all of this information is important.  No one factor alone will determine the score.  But knowing how these scores are calculated offers a landlord valuable insights into the tenant credit report and why that information is useful in evaluating the prospective tenant. 

By considering credit score, a landlord can get a feel for whether the number is consistent with what information and history the tenant has shared with the landlord, or whether it appears that the applicant is not being completely honest. For more information on evaluating tenant credit reports, see Where Do You Draw the Line With Tenant Credit?

Not all tenant credit reports include a credit score.  For instance, landlords can choose a Credit Decision Report which offers a recommendation based on the applicant’s credit with a grade of A+ through F.  Both Credit Decision Reports and scored credit reports provide previous addresses, and list liens and judgments–critical information in evaluating tenant prospects.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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