How's your FICO Score?

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

The three agencies use slightly different formulas to build a credit score. Fair Isaac and Cooriginally developed this score. . While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While these methods vary from one agency to another, the differences aren't huge; they all use the following factors in calculating 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 a history of late payments?
• Balances on your Credit Cards - How many credit card accounts do you have, and how much do you owe?
• Inquiries on Your Credit - How many times have you had your credit checked for a loan?

Each of these is assigned a value and a weight. The results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher is always better. Most home buyers likely find their credit scores falling above 620.

Not just for qualifying

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

Improving your score

Is it possible to improve your FICO score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You must remove any incorrect reporting on your credit report; this is the only "quick fix" for credit troubles.

How do I find out my credit score?

To improve your FICO score, you must have the credit reports that are used to build it, and of course, you need the score itself. Fair Isaac, the corporation that invented the original FICO score, offers FICO scores on its website: myFICO.com. For a reasonable fee, you can get your FICO score from all three agencies, along with your credit report. They also provide information and online 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 at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is fast and very inexpensive.

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 credit scores? Give us a call at 5613734149.