Scoring your Credit - How's your FICO?

Because we live in a computer-driven world, it should come as no surprise that your creditworthiness comes down to a single number. All the years you've been paying your various bills: your mortgage, vehicle payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Equifax, TransUnion, and Experian, the three major credit agencies, each have a proprietary formula for building your credit score. The original FICO 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 your credit score:

• Credit History - Have you had credit for years, or for just a short time?
• Late Payments - Have you paid more than 30 days late?
• Credit Card Balances - How many accounts do you carry? 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. FICO scores range from 300 to 800. Higher is always better. Most borrowers who want to get a mortgage loan these days score 620 or above.

Your credit score affects how much you pay in interest every month

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.

Raising your credit score

What can you do about your FICO score? Very little in the short term. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You must, of course, remove any incorrect reporting from your credit report; this is really the only way to quickly improve your credit score.

Getting your FICO score

To improve your credit score, you've got to have the reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to quickly get your FICO score from all three agencies, along with your credit report. They also provide helpful information and online tools that help you understand how to improve your FICO score.

You can get a free credit report once per year from all three agencies when you visit 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 obtain the most favorable mortgage.

Curious about your FICO score? Call us at 3172889434.