About the FICO Credit Score

Since we live in an computer-driven world, it's not surprising that your ability to repay your mortgage comes down to a single number. Credit reporting agencies use your history of paying loans in order to create this score.

Experian, TransUnion, and Equifax, the three major credit agencies, each have a proprietary formula for building 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 each of the models considers a range of data available in your credit report, the differences aren't huge; each agency uses the following factors in calculating a credit score:

• Credit History - How many years have you had credit?
• Payment History - Do you have any payments later than 30 days?
• Balances on your Credit Cards - How many accounts do you carry? How much do you owe on your accounts?
• Inquiries on Your Credit - How many times have you had your credit checked for a loan?

These factors are assigned weights based on the formula being used. The result is a single number: your FICO score. FICO scores can be as low as 300 and as high as 800. Higher scores are better. Most home buyers likely find their scores falling above 620.

Not just for qualifying

FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

What can you do to improve your FICO score? Unfortunately, not much. Despite what you hear from "credit repair" companies, the score is calculated from your lifetime credit history, so it's not possible to raise it significantly in the short term. (Of course you can and should appeal incorrect items on your credit report.)

Getting your FICO score

Before you can improve your credit score, you have to obtain your score and make sure that the reports from each agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can get your FICO from all three reporting agencies, along with your credit report. They also provide helpful information and online tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report once a year from the three major credit reporting agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is fast and inexpensive.

Armed with this info, you will be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.

Curious about your credit score? Call us: 3038627760.