To best understand FICO scores, four points need to be examined.

1. FICO scores, developed by Fair, Isaac & Co. are generic credit scores created for general use in making lending decisions and are based on credit data only. FICO scores range from 400 to 900. The lower the score, the greater the risk of default. FICO scores are provided by all three credit bureaus including Equifax BEACON SCORE, Trans Union EMPERICA SCORE and Experian FICO SCORE. A borrower's may vary from one bureau to another because the information reported to one bureau may not have been reported to another creating differences in the data or amount of information contained in the repositories' records.

2. What do these numbers mean? Using 29 "risk factors" on a national level, a credit risk predictor has been created. Generally speaking, FNMA and Freddie Mac recommend a very thorough review of any applicant whose credit scores falls below 620, which indicates high risk. Borrowers with usable credit scores in this range are likely to have an unacceptable credit reputation, so a cautious review is in order. The credit risk is uncertain for borrowers with credit scores between 620 and 660, so it is recommended that underwriters perform a comprehensive review, which involves underwriting all aspects of the borrower's credit history. A borrower with a credit score in this range probably has a marginal credit reputation, that should not by layered with other risks. Borrowers with credit scores above 660 are likely to have an acceptable credit reputation. Underwriters can perform a basic review of these loan files. That means they review the mortgage file for consistency and completeness, to confirm the borrowers' willingness to repay as agreed.

3.What factors determine a FICO credit score? The main consideration determining a credit score is the borrower's record of paying debts. Other key factors include: public records pertaining to credit; outstanding balances against available credit limits; recent credit inquiries generated by the borrower seeking credit; and the age of open accounts. Factors not considered are a borrower's age, race, gender, religion, national origin, marital status or receipt of public assistance.

4. If a borrower pays off an outstanding collection, how many points will be added to the score? It's not possible to say what effect changing on or more items on a credit report will have on a borrower's credit score. A credit score is determined by assessing a number of individual factors and combinations of factors, so the impact of changes will differ from one borrower to another.