FICO - Your Credit Score

Since we live in an computer-driven society, it's not surprising that your ability to repay your mortgage loan comes down to just one number. The FICO score is built by credit reporting agencies. These agencies use the payment history of your various loans: mortgages, car/motorcycle loans, credit cards, and the like.

The three reporting agencies use slightly different formulas to build a credit score. Fair Isaac and Cooriginally developed this score. . 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 these methods vary, the differences aren't huge; they all use the following factors to calculate a score:

• Your Credit History - How many years have you had credit?
• Payment History - Do you have any payments later than 30 days?
• Your Credit Card Balances - How many accounts? How much do you owe on your accounts?
• Credit Inquiries - How many times have you had your credit checked for a loan?

These factors are weighted slightly differently depending on which formula the agency uses. The result is a single number: your credit score. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Typical home buyers will probably find their scores falling above 620.

Not just for qualifying

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.

Can I raise my credit score?

How can you raise your FICO score? Despite what you hear from "credit repair" companies, the FICO score is based on your lifelong credit history, so you can't turn it around right away. You must appeal for the credit agency to remove any incorrect reporting on your credit report, which is the only way to quickly improve your credit score.

How do I find out my credit score?

To raise your FICO score, you must have the reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac, the company that offered the original FICO score, sells FICO scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three reporting agencies. They also provide helpful information and tools that can help you understand how to improve your FICO score.

You can get a federally-mandated free credit report every year from the three major agencies at AnnualCreditReport.com. While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.

Armed with this info, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Want to know more about your FICO score? Call us: 3173854768.