FICO - Your Credit Score

Because we live in an automated, it should come as no surprise that your creditworthiness boils down to one number. Credit reporting agencies use your history of paying loans to create this score.

The three reporting agencies use slightly different formulas to build a 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 from one agency to another, the differences aren't huge; they all use the following factors to calculate your credit score:

• Credit History - How many years have you had credit?
• Payment History - Do you have any payments later than 30 days?
• Credit Card Balances - How many accounts? How much do you owe?
• Requests for Credit - 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. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Most folks who want to get a mortgage these days have a score above 620.

Your score affects your interest rate

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

Raising your FICO score

Is it possible to 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, of course, remove any incorrect reporting from your credit report; this is the only way to quickly improve your credit score.

Know your FICO score

In order to improve your score, you've got to have the reports that are used to build it, and of course, you need the score itself. Fair Isaac, the company that offered the first FICO score, offers scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three reporting agencies. They also provide 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. You won't get a free credit score from AnnualCreditReport.com, but getting it is fast and inexpensive.

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

Want to know more about credit scores? Call us: 7084035181.