You Credit Score- How's Your FICO?

Since our society is so computer-driven, it should come as no surprise that your ability to repay virtually any loan comes down to a single number. This score is built by credit reporting agencies. They use the payment history from all of your loans: mortgages, car loans, credit cards, and others.

The three 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 the formulas vary from one agency to another, the differences aren't huge; each agency uses the following factors in building your credit score:

  • Credit History - How long have you had credit?
  • Late Payments - Do you have any payments later than 30 days?
  • Balances on your Credit Cards - How many credit card accounts do you hold, and how much do you owe?
  • Requests for Credit - How many times have you had your credit checked for a loan?

Each of these is assigned a value and a weight. The result is a single number: your FICO score. Credit scores can be as low as 300 and as high as 800. Higher is better. Most people who want to get a mortgage in the current environment have a score above 620.

Your score affects your monthly payment

Did you know? FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Can I improve my FICO score?

What can you do to improve your FICO score? Unfortunately, not much. Despite what you hear from "credit repair" companies, the score is built on your lifelong credit history, so you can't turn it around right away. (Of course you must remove incorrect data on your credit report.)

Know your FICO

In order to raise your score, you've got to have the reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the company that invented the first FICO score, offers credit scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score along with reports from all three reporting agencies. Also available are 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 every year from the three major credit reporting agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is fast and very inexpensive.

Armed with this info, you will 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: 877-310-6200.

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