How's your FICO Score?

Because we live in a computer-driven world, you're probably not surprised to hear that your ability to repay your mortgage loan comes down to one number. Credit reporting agencies use your history of paying all types of loans in order to create your FICO score.

All three credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a credit score. Fair Isaac and Cooriginally developed this score. . While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While the formulas vary from one agency to another, all of the agencies use the following to calculate your score:

  • Your Credit History - Have you had credit for years, or for just a short time?
  • Payment History - Do you have any payments later than 30 days?
  • Credit Card Balances - How many accounts do you carry? How much do you owe on your accounts?
  • Requests for Credit - How many times have you had your credit checked for a loan?

These factors are assigned weights based on the formula being used. Each formula produces a single number which may vary slightly by agency. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Most folks who want to get a mortgage have a score above 620.

Credit scores make a huge difference in your interest rate

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Lenders give lower interest rates to individuals with higher scores.

Can I raise my credit score?

How can you raise your FICO score? Because the FICO score is entirely based on your lifelong credit history, it's difficult to change it quickly. You should appeal for the credit agency to remove any incorrect data on your credit report, which is the only way to quickly improve your credit score.

Getting your credit score

Before you can improve your FICO score, you must get your score and be sure that the credit reports from each credit reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to quickly get your FICO from all three reporting agencies, along with your credit report. Also available are helpful information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once per year from the three major agencies at AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.

Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to get the right mortgage for you.

Want to know more about your credit score? Call us at 3038627760.