You Credit Score: How's Your FICO?

Since we live in an computer-driven society, it's not surprising that your ability to repay your mortgage boils down to just one number. Credit reporting agencies use your history of paying loans in order to build this score.

Each of the three credit agencies has its own formula for building your 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 each of the models considers a range of data available in your credit report, all of the agencies use the following to build your credit score:

  • Credit History - How long have you had credit?
  • Payment History - Have you paid more than 30 days late?
  • Balances on your Credit Cards - How many accounts? How much do you owe?
  • Requests for Credit - How many times have you had your credit checked for a loan?

These factors are weighted a little bit differently depending on the formula being used. Each formula produces a single number which may vary slightly from one agency to another. Credit scores range from 300 to 800. Higher is always better. Typical home buyers probably find their credit scores above 620.

Your FICO score greatly affects your interest rate

Did you know? FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should remove any incorrect reporting on your credit report; this is really the only "quick fix" for credit troubles.

Know your FICO score

In order to improve your score, you must get the credit reports that are used to build it, and of course, you need the score itself. Fair Isaac, the company that invented the first FICO credit score, sells FICO scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score along with reports from all three credit reporting agencies. Also available are information and tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once a year from all three agencies by visiting AnnualCreditReport.com. While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.

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

Curious about credit scores? Call us at 3038627760.