About the FICO Credit Score

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

Each of the three credit agencies has its own formula for building your 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 in building a credit score:

• Your Credit History - How many years have you had credit?
• Late Payments - Have you paid more than 30 days late, and how often?
• Balances on your Credit Cards - How many accounts do you hold? How much do you owe on your accounts?
• Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of giving you a loan?

These factors are assigned weights based on the formula being used. Each formula produces a single number which may vary slightly by agency. FICO scores can be as low as 300 and as high as 800. Higher is better. Typical home buyers will probably find their credit scores above 620.

Not just for qualifying

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.

Can I improve my credit score?

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Despite what you hear from "credit repair" companies, the score is calculated from your lifetime credit history, so it's not possible to raise it significantly in the short term. (Of course you can and should have incorrect items removed from your credit report.)

How do I find out my FICO score?

Before you can improve your credit score, you must get your score and ensure that the reports from each agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can quickly get your FICO score from all three reporting agencies, along with your credit report. Also available are helpful information and tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once a year from all three credit reporting agencies by visiting 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.

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

Curious about credit scores? Give us a call at 7072522700.