You Credit Score- How's Your FICO?

Since we live in an automated world, it's not surprising that your ability to repay your mortgage loan boils down to just one number. This score is created by credit reporting agencies. They use the payment history of your various loans: mortgages, car/motorcycle loans, credit cards, and others.

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 each of the models considers a range of data available in your credit report, the differences aren't huge; they all use the following factors in building your credit score:

  • Credit History - How long have you had credit?
  • History of Payments - Do you have any payments later than 30 days?
  • Your Credit Card Balances - How many credit card accounts do you have, and how much do you owe on them?
  • Requests for Credit - How many times have lenders pulled your credit for the purpose of lending you money?

Each of these factors is assigned a value and a weight. The result is one number. FICO scores range from 300 to 800. Higher is always better. Most borrowers who want to get 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. Lenders give lower interest rates to individuals with higher scores.

Improving your score

Is there any way to improve your FICO score? Despite what you hear from "credit repair" companies, the FICO score is built on your lifetime credit history, so it's not possible to raise it significantly in the short term. You must, of course, appeal for the credit agency to remove any incorrect reporting on your credit report; this is the only "quick fix" for credit problems.

How do I find out my FICO score?

To raise your credit score, you must obtain the reports that are used to build it, and of course, you need the score itself. 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 credit reports from all three reporting agencies. They also provide helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report every year from the three major agencies by visiting AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.

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

Want to know more about credit scores? Call us at 877-310-6200.

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