About the FICO Credit Score

Since we live in a computer-driven world, it should come as no surprise that your creditworthiness 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 loans and others.

Each of the three credit reporting agencies has its own formula for building your credit score. The original FICO model was developed by Fair Isaac and Company. 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 each of the models considers a range of data available in your credit report, each agency uses the following to determine your score:

• Credit History - How many years have you had credit?
• Late Payments - Have you paid more than 30 days late?
• Balances on your Credit Cards - How many accounts do you carry? How much do you owe?
• Requests for Credit - How many times have you had your credit checked for a loan?

These factors are assigned weights based on the formula being used. 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 is always better. Most home buyers these days have a score above 620.

Credit scores make a huge difference in 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 probably a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

Is there any way to raise your FICO score? Since the score is entirely based on a lifetime of credit history, it's hard to change it quickly. (Of course you must remove incorrect data on your credit report.)

Know your FICO

Before you can improve your FICO score, you have to know your score and make certain that the credit reports from each agency are correct. Fair Isaac, the corporation that invented the first FICO credit score, offers FICO scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score along with reports from all three agencies. They also provide 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 all three credit reporting agencies when you visit 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 will be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.

Want to know more about your FICO score? Give us a call: 7084035181.