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 comes down to a single number. The FICO score is compiled by credit reporting agencies. These agencies use the payment history from all of your loans: credit cards, mortgages, car/boat 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 the formulas vary from one agency to another, all of the agencies use the following to build your score:

• Credit History - How many years have you had credit?
• History of Payments - Have you paid more than 30 days late, and how often?
• Credit Card Balances - How many accounts? How much do you owe?
• Credit Inquiries - How many times have lenders pulled your credit report for the purpose of giving you a loan?

Each of these factors is assigned a value and a weight. The result is one number. Credit scores range from 300 to 800. Higher scores are better. Most home buyers in the current environment have a score above 620.

FICO makes a difference in your interest rate

Did you know? Credit scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.

Raising your credit score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Because the FICO score is entirely based on your lifelong credit history, it's very difficult to change it quickly. (Of course you must remove incorrect data on your credit report.)

How do I find out my credit score?

To improve your FICO score, you've got to obtain the credit reports that the agencies use 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 as well as reports from all three agencies. Also available are helpful information and tools that help you improve your FICO score.

You can get a federally-mandated free credit report once a year from the three major credit reporting agencies at AnnualCreditReport.com. While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.

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

Curious about credit scores? Call us at 7084035181.