How's your FICO Score?
Because we live in an automated, you're probably not surprised to hear that your creditworthiness boils down to a single number.
All the years you've been paying your various bills: your mortgage, car payments, and credit card bills are analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.
The three reporting agencies use slightly different formulas to build 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, all of the agencies use the following to build a credit score:
- Your Credit History - How long have you had credit?
- Late Payments - Do you pay your bills on time?
- Balances on your Credit Cards - How many accounts do you hold, and how much do you owe on them?
- 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. Each formula produces a single number which may vary a a little from one agency to another. FICO scores range from 300 to 800. Higher scores are better. Most home buyers in the current environment have a score above 620.
FICO makes a difference in your interest rate
Did you know? Credit scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.
Improving your score
What can you do to improve your FICO score? Unfortunately, not much. So called "credit repair" companies advertise quick fixes, but the score is based on your lifelong credit history, so it's not possible to raise it significantly in the short term. (Of course you must appeal incorrect items on your credit report.)
Getting your credit score
To raise your score, you must obtain the credit reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the corporation that offered the first FICO score, offers credit scores on its website: myFICO.com. It's inexpensive to get your FICO score from all three agencies, along with your credit report. Also available are information and online tools that help you improve your FICO score.
You can get a free credit report once per year from all three credit reporting agencies by visiting AnnualCreditReport.com. These reports do not include a free score, but it's very inexpensive to get one at the same time.
Armed with this information, you will be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.
Want to know more about credit scores? Give us a call: 5613734149.