How's your FICO Score?

Since we live in an computer-driven society, it should come as no surprise that your ability to repay your mortgage boils down to just one number. This score is created by credit reporting agencies. They use the payment history from all of your loans: credit cards, mortgages, car loans and others.

Each of the three credit reporting 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, the differences aren't huge; each agency uses the following in calculating your credit score:

• Credit History - Have you had credit for many years, or for just a short time?
• Payment History - Do you have a history of late payments?
• Your Credit Card Balances - How many accounts? How much do you owe?
• Requests for Credit - How many times have lenders pulled your credit report for the purpose of lending you money?

These factors are assigned weights based 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 better. Most home buyers will likely find their FICO scores above 620.

Your FICO score affects your monthly payment

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.

Can I improve my credit score?

Is it possible to raise your FICO score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should appeal for the credit agency to remove any incorrect reporting from your credit report; this is the only way to quickly improve your credit score.

Getting your credit score

Before you can improve your FICO score, you must know your score and make certain that the credit reports from each agency are correct. Fair Isaac, the company that offered the original FICO credit score, offers FICO scores on myFICO.com. For a reasonable fee, you can get your FICO score from all three agencies, along with your credit report. They also provide helpful 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 every year from all three credit reporting agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is quick and inexpensive.

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? Give us a call at 3038627760.