About the FICO Credit Score

Because our world is so automated, it should come as no surprise that your ability to repay virtually any loan boils down to one number. This score is compiled by credit agencies. These agencies use the payment history from all of your loans: credit cards, mortgages, car/boat loans etcetera.

The three credit reporting agencies use slightly different formulas to build a credit score. Fair Isaac and Cooriginally developed this score. . 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, all of the agencies use the following to calculate your credit score:

  • Your Credit History - Have you had credit for years, or for a short time?
  • Late Payments - Do you pay your bills on time?
  • Credit Card Balances - How many accounts do you carry? How much do you owe on your accounts?
  • Credit Inquiries - How many times have you had your credit checked for a loan?

These factors are assigned weights based on the formula being used. Each formula produces a single number which may vary slightly from one agency to another. Credit scores range from 300 to 800. Higher is better. Most home buyers will likely find their FICO scores falling above 620.

Your FICO score affects your monthly payment

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 it possible to raise your FICO score? Despite what you hear from "credit repair" companies, the FICO score is calculated from your lifelong credit history, so it's not possible to raise it significantly in the short term. (Of course you must have incorrect items removed from your credit report.)

Know your FICO score

To improve your credit score, you must have the credit reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to get your FICO score from all three reporting agencies, along with your credit report. Also available are helpful information and tools that 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 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'll be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Curious about credit scores? Call us: 7084035181.

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Avalon Mortgage Services, Inc. an Illinois Residential Mortgage Licensee

NMLS#:283614 Illinois license#: MB.0003198

9439 West 144th Place
Orland Park, IL 60462-2543