You Credit Score- How's Your FICO?

Since we live in an computer-driven society, it's not surprising that your ability to repay your mortgage loan comes down to just one number. The years of paying your various bills: your mortgage, car payments, and credit card bills are analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Experian, TransUnion, and Equifax, the three major credit reporting agencies, each have their own proprietary formula for building 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, each agency uses the following to calculate your credit score:

  • Your Credit History - How long have you had credit?
  • History of Payments - Have you paid more than 30 days late?
  • Balances on your Credit Cards - How many accounts do you have, and how much do you owe on them?
  • 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 results are added up and distilled into a single number. FICO scores range from 300 to 800. Higher scores are better. Most home buyers in the current environment have a score above 620.

Your score affects how much you pay in interest every month

Did you know? Credit scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.

Raising your credit score

Is there any way to raise your credit score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should appeal for the credit agency to remove any incorrect reporting on your credit report, which is the only way to quickly improve your credit score.

Getting your credit score

To raise your score, you've got to have the credit reports that are used 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, fast, and easy to get your credit score along with reports from all three reporting agencies. They also provide helpful information and online tools that can help you improve your credit score.

You can get a federally-mandated free credit report once a year from the three major agencies at 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.

Armed with this info, you will be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.

Want to know more about your FICO score? Call us: (707) 252-2700.

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