You Credit Score- How's Your FICO?

Because our society is so automated, it should come as no surprise that your creditworthiness comes down to a single number. The FICO score is built by credit reporting agencies. These agencies use the payment history from all of your loans: credit cards, mortgages, car loans and others.

All three major credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a credit score. The original FICO was developed by Fair Isaac and Company. 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 to build your credit score:

• Your Credit History - Have you had credit for many years, or for just a short time?
• History of Payments - Do you have any payments later than 30 days?
• Credit Card Balances - How many credit card accounts do you hold, and how much do you owe?
• Credit Inquiries - How many times have lenders pulled your credit report for the purpose of lending you money?

Each of these factors is assigned a value and a weight. The result is a single number: your credit score. Credit scores range from 300 to 800. Higher scores are better. Most home buyers these days have a score above 620.

Your FICO score affects your interest rate

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

Is it possible to raise your FICO score? Because the score is based on your lifelong credit history, it's difficult to significantly improve the number with quick fixes. You must appeal for the credit agency to remove any incorrect reporting on your credit report; this is the only way to quickly improve your credit score.

Know your FICO score

Before you can improve your score, you must know your score and be sure that the credit reports from each agency are correct. Fair Isaac, the company that offered the original FICO score, sells credit scores on myFICO.com. It's inexpensive to quickly get your FICO score from all three agencies, along with your credit report. They also provide helpful information and tools that help you understand how to improve your credit score.

You can get a free credit report once per year from the three major 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.

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

Curious about your FICO score? Give us a call at 5613734149.