You Credit Score- How's Your FICO?

Since we live in an automated, you're probably not surprised to hear that your creditworthiness comes down to a single number. This score is built by credit agencies. These agencies use the payment history of your various loans: mortgages, car loans, credit cards, and others.

The three reporting 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, the differences aren't huge; each agency uses the following in building your score:

• Credit History - How many years have you had credit?
• History of Payments - Do you have a history of late payments?
• Balances on your Credit Cards - How many accounts? How much do you owe?
• Credit Inquiries - How many times have you had your credit checked for a loan?

These factors are weighted differently depending on which formula the agency uses. The results are added up and distilled into a single number. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most home buyers will likely find their scores falling 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.

Improving your score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Because the FICO score is based on your lifelong credit history, it is difficult to change it quickly. (Of course you can and should appeal incorrect items on your credit report.)

Getting your FICO score

Before you can improve your score, you must know your score and be sure that the reports from each reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to quickly get your FICO score from all three reporting agencies, along with your credit report. They also provide information and tools that help you improve your FICO score.

You can get a federally-mandated free credit report every year from all three credit reporting agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast and very inexpensive.

Now that you have all the facts, 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 credit scores? Call us at 5613734149.