You Credit Score: How's Your FICO?

Since we live in an computer-driven world, it's not surprising that your ability to repay your mortgage loan boils down to just one number. The FICO score is built by credit agencies. They use the payment history of your various loans: credit cards, mortgages, car loans etcetera.

All three credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a credit score. The original FICO score was developed by Fair Isaac and Company. While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While each of the models considers a range of data available in your credit report, each agency uses the following to determine a score:

• Credit History - How many years have you had credit?
• Late Payments - Have you paid more than 30 days late, and how often?
• Your Credit Card Balances - How many accounts do you have, and how much do you owe on them?
• Requests for Credit - How many times have you had your credit checked for a loan?

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

FICO makes a 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. Lenders give lower interest rates to individuals with higher scores.

Can I improve my FICO score?

Is there any way to raise your FICO score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you must remove incorrect data on your credit report.)

How do I find out my credit score?

To improve your score, you've got to get the credit reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can get your FICO from all three agencies, along with your credit report. Also available are helpful information and online tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report once per year from the three major agencies by visiting AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.

Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to get the right mortgage for you.

Curious about credit scores? Call us at 5613734149.