FICO - Your Credit Score

Since we live in a computer-driven world, you're probably not surprised to hear that your creditworthiness comes down to a single number. This score is compiled by credit agencies. They use the payment history of all of your loans: credit cards, mortgages, car loans etcetera.

All three major credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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 each of the models considers a range of data available in your credit report, each agency uses the following to determine your score:

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

These factors are weighted slightly differently depending on the formula being used. The results are added up and distilled into a single number. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most people getting a mortgage 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. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

Can I improve my credit score?

Is there any way to raise your credit score? Because the FICO score is entirely based on your lifelong credit history, it is hard to significantly improve the score with quick fixes. (Of course you must appeal incorrect items on your credit report.)

How do I find out my credit score?

Before you can improve your score, you have to obtain your score and make sure that the reports from each credit reporting agency are correct. Fair Isaac, the corporation that invented the first FICO score, sells scores on its website: myFICO.com. It's inexpensive to get your FICO from all three agencies, along with your credit report. Also available are information and online tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report once per year from all three credit reporting agencies by visiting 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.

Now that you have all the facts, 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? Give us a call: (708) 403-5181.

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