How's your FICO Score?

Since our world is so automated, it should come as no surprise that your ability to repay your mortgage boils down to one number. This score is compiled by credit reporting agencies. They use the payment history from your various loans: credit cards, mortgages, car/boat loans and the like.

Each of the three credit reporting agencies has its own formula for building your 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 each of the models considers a range of data available in your credit report, each agency uses the following to build your credit score:

  • 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?
  • Credit Card Balances - How many accounts do you carry? How much do you owe on your accounts?
  • 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 varies slightly from one agency to another. FICO scores range from 300 to 800. Higher is better. Most home buyers will likely find their scores above 620.

Not just for qualifying

Credit scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Can I improve my credit score?

What can you do about your FICO score? Unfortunately, not much. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you can and should remove incorrect data on your credit report.)

How do I find out my credit score?

Before you can improve your credit score, you must obtain your score and make sure that the credit reports from each agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can quickly get your FICO score from all three reporting agencies, along with your credit report. They also provide helpful information and 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 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.

Want to know more about credit scores? Call us: 561-373-4149.


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