Scoring your Credit - How's your FICO?

Because we live in a computer-driven society, it should come as no surprise that your ability to repay your mortgage boils down to one number. Credit reporting agencies use your loan payment history to build this score.

All three credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at 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 the formulas vary from one agency to another, all of the agencies use the following to determine a score:

  • Your 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? How much do you owe?
  • 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. The result is one number. FICO scores can be as low as 300 and as high as 800. Higher is better. Most home buyers have a score above 620.

Your FICO score affects your interest rate

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

Is it possible to raise your credit score? Since the score is based on your lifelong credit history, it is difficult to change it quickly. (Of course you must appeal incorrect items on your credit report.)

How do I find out my credit score?

Before you can improve your credit score, you must get your score and ensure that the credit reports from each agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to quickly get your FICO score from all three agencies, along with your credit report. Also available are helpful information and tools that help you understand how to improve your FICO score.

You can get a free credit report once a year from all three credit reporting agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is quick and inexpensive.

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

Curious about your FICO score? Call us: 877-310-6200.

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