Scoring your Credit - How's your FICO?

Since our world is so computer-driven, it should come as no surprise that your creditworthiness comes down to a single number. This score is built by credit reporting agencies. They use the payment history of all of your loans: credit cards, mortgages, car/boat loans etcetera.

Experian, TransUnion, and Equifax, the three major credit agencies, each have a proprietary formula for building your credit score. The original FICO score 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, each agency uses the following to build 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?
  • Your Credit Card Balances - How many accounts do you hold? How much do you owe?
  • Inquiries on Your Credit - How many times have lenders pulled your credit report for the purpose of giving you a loan?

These factors are weighted a little bit differently depending on which formula the agency uses. The result is one number. Credit scores can be as low as 300 and as high as 800. Higher is always better. Most home buyers will probably find their scores falling between 620 and 800.

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.

Raising your FICO score

What can you do to improve your FICO score? Very little in the short term. So called "credit repair" companies advertise quick fixes, but the FICO score is formulated from your lifelong credit history, so you can't turn it around right away. You should remove any incorrect data on your credit report; this is really the only way to quickly improve your credit score.

Getting your FICO score

Before you can improve your FICO score, you have to obtain your score and make certain that the credit reports from each agency are correct. Fair Isaac, the corporation that offered the first FICO score, offers scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three credit reporting agencies. Also available are information and tools that can help you understand how to improve your credit score.

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

Armed with this info, you'll 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: 5613734149.


The Elite Lending Team at Milestone Mortgage Corporation
NMLS# 133260

30 Years as your Local Mortgage Lender

601 Heritage Dr Ste 123
Jupiter, FL 33458