You Credit Score: How's Your FICO?

Since we live in an automated world, it's not surprising that your ability to repay your mortgage boils down to a single number. The FICO score is compiled by credit reporting agencies. They use the payment history of your various loans: credit cards, mortgages, car/boat loans etcetera.

The three credit reporting agencies use slightly different formulas to build a credit score. The original FICO score was developed by Fair Isaac and Company. 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, each agency uses the following to determine a score:

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

Each of these factors is assigned a value and a weight. Each formula produces a single number which may vary a a little by agency. Credit scores range from 300 to 800. Higher is better. Typical home buyers likely find their FICO scores falling between 620 and 800.

Not just for qualifying

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Lenders give lower interest rates to individuals with higher scores.

Raising your FICO score

Is there any way to improve your FICO score? So called "credit repair" companies advertise quick fixes, but the FICO score is based on your lifelong credit history, so you can't turn it around right away. You should, of course, appeal for the credit agency to remove any incorrect data on your credit report, which is the only way to quickly improve your credit score.

Know your FICO score

Before you can improve your score, you have to know your score and make certain that the reports from each agency are correct. Fair Isaac, the corporation that invented the first FICO score, sells credit scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score along with reports from all three credit reporting agencies. Also available are 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 federally-mandated free credit report once per year from the three major agencies at AnnualCreditReport.com. These reports do not include a free score, but it's very inexpensive to get one at the same time.

Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to get the right mortgage for you.

Curious about credit scores? Give us a call: 7084035181.