About the FICO Credit Score

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

Experian, TransUnion, and Equifax, the three major credit agencies, each have a proprietary 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 these methods vary, the differences aren't huge; all of the agencies use the following to calculate your score:

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

These factors are assigned weights based on the formula being used. The results are added up and distilled into a single number. Credit scores can be as low as 300 and as high as 800. Higher is better. Typical home buyers will likely find their scores falling above 620.

Your score affects your monthly payment

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 it possible to raise your credit score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should remove any incorrect data from your credit report, which is the only way to quickly improve your credit score.

Know your FICO score

Before you can improve your FICO score, you must know your score and ensure that the credit reports from each reporting 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 from all three agencies, along with your credit report. They also provide information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

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

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

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