You Credit Score- How's Your FICO?

Since we live in an computer-driven world, it should come as no surprise that your ability to repay your mortgage boils down to just one number. Credit reporting agencies use your history of paying loans in order to create a FICO score.

All three credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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, each agency uses the following to determine your score:

• Your Credit History - Have you had credit for years, or for just a short time?
• Late Payments - Do you pay your bills on time?
• Credit Card Balances - How many credit card accounts do you have, and how much do you owe on them?
• Credit Inquiries - How many times have lenders pulled your credit report for the purpose of lending you money?

These factors are weighted a little bit differently depending on the formula being used. Each formula produces a single number which may vary slightly by agency. FICO scores range from 300 to 800. Higher is always better. Most home buyers have a score above 620.

Credit scores make a big difference in your interest rate

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 a better credit risk, and thus may qualify for a better mortgage rate.

Raising your FICO score

What can you do to raise your FICO score? Very little in the short term. Despite what you hear from "credit repair" companies, the score is based on your lifetime credit history, so you can't turn it around right away. You must appeal for the credit agency to remove any incorrect data on your credit report, which is the only way to quickly improve your credit score.

Getting your credit score

In order to raise your score, you must get the credit reports that are used to build it, and of course, you need the score itself. Fair Isaac, the company that offered the first FICO score, sells scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score along with credit reports from all three reporting agencies. Also available are helpful information and tools that can help you understand how to improve your credit 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 quick and inexpensive.

Armed with this info, you'll be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Curious about your credit score? Give us a call: 7072522700.