About the FICO Credit Score

Since our world is so computer-driven, you're probably not surprised to hear that your ability to repay your mortgage loan boils down to one number. Credit reporting agencies use your payment history to build a FICO score.

All three credit 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, the differences aren't huge; they all use the following factors in calculating your score:

  • Your Credit History - How many years have you had credit?
  • Late Payments - Do you have a history of late payments?
  • Balances on your Credit Cards - How many accounts? How much do you owe on your accounts?
  • Credit Inquiries - How many times have you had your credit checked for a loan?

These factors are weighted differently depending on which formula the agency uses. 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 likely find their credit scores 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.

Raising your credit score

Is it possible to improve your credit score? So called "credit repair" companies advertise quick fixes, but the score is based on your lifetime credit history, so you can't turn it around right away. You should appeal for the credit agency to remove any incorrect reporting from your credit report; this is the only "quick fix" for credit troubles.

Getting your FICO score

In order to raise your score, you've got to obtain the credit reports that are used to build it, and of course, you need the score itself. Fair Isaac, the corporation that offered the original FICO score, offers FICO scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score along with reports from all three agencies. They also provide information and online tools that can help you improve your credit score.

You can get a free credit report every year from all three credit reporting agencies when you visit 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 get the right mortgage for you.

Want to know more about credit scores? Give us a call: 7084035181.

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Avalon Mortgage Services, Inc. an Illinois Residential Mortgage Licensee

NMLS#:283614

9439 West 144th Place
Orland Park, IL 60462-2543