You Credit Score- How's Your FICO?
Since our society is so computer-driven, it should come as no surprise that your ability to repay virtually any loan comes down to one number.
This score is built by credit reporting agencies. They use the payment history from all of your loans: mortgages, car/motorcycle/boat loans, credit cards, and the like.
Each of the three credit reporting agencies has its own formula for building your credit score. Fair Isaac and Cooriginally developed this score. .
Experian uses this model and calls its score FICO. Equifax's model, based on FICO, is called BEACON, while TransUnion, which also uses a slightly modified FICO, calls its score EMPIRICA. While the formulas vary, each agency uses the following to build your score:
- Your Credit History - How long have you had credit?
- Late Payments - Have you paid more than 30 days late, and how often?
- Balances on your Credit Cards - How many credit card accounts do you have, and how much do you owe on them?
- Credit Inquiries - How many times have you had your credit checked for a loan?
Each of these is assigned a value and a weight. The results are added up and distilled into a single number. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most home buyers these days have a score above 620.
Your score greatly affects your monthly payment
Did you know? Credit 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.
Raising your FICO score
What can you do to raise your FICO score? Unfortunately, not much. 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 data from your credit report; this is the only way to quickly improve your credit score.
Getting your FICO score
To raise your FICO score, you've got to get the credit reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to get your FICO score from all three reporting agencies, along with your credit report. They also provide helpful information and tools that can help you improve your FICO score.
You can get a free credit report once a year from all three agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is quick and very 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.
Curious about your credit score? Call us: (708) 403-5181.