FICO - Your Credit Score

Because our society is so computer-driven, it's probably not that surprising that your ability to repay your mortgage boils down to a single number. All the years you've been paying your various bills: your mortgage, vehicle payments, and credit card bills can be analyzed, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

The three agencies use slightly different formulas to build a credit score. The original FICO model was developed by Fair Isaac and Company. While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While the formulas vary, the differences aren't huge; they all use the following in building a credit score:

• Your Credit History - How many years have you had credit?
• Late Payments - Do you have any payments later than 30 days?
• Balances on your Credit Cards - How many accounts do you hold, and how much do you owe on them?
• Inquiries on Your Credit - How many times have you had your credit checked for 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 is always better. Most home buyers in the current environment have a score above 620.

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.

Improving your score

What can you do to improve your FICO score? Very little in the short term. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should remove any incorrect data on your credit report; this is the only way to quickly improve your credit score.

Know your FICO score

Before you can improve your credit score, you have to obtain your score and ensure that the reports from each reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive, fast, and easy to get your credit score as well as reports from all three credit reporting agencies. They also provide information and tools that can help you improve your FICO score.

You can get a free credit report every year from the three major agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast and inexpensive.

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

Curious about your FICO score? Give us a call: 7084035181.