Scoring your Credit - How's your FICO?

Since our society is so automated, it's probably not that surprising that your ability to repay virtually any loan boils down to one number. All the years you've been paying your various bills: your mortgage, car payments, and credit card bills can be analyzed, sliced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Each of the three credit agencies has its own formula for building your credit score. The original FICO 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, the differences aren't huge; they all use the following in calculating a score:

  • Your Credit History - How many years have you had credit?
  • History of Payments - Do you have any payments later than 30 days?
  • Balances on your Credit Cards - How many accounts? How much do you owe?
  • Credit Inquiries - How many times have lenders pulled your credit report for the purpose of giving you a loan?

These factors are weighted a little bit differently depending on which formula the agency uses. The result is one number. Credit scores range from 300 to 800. Higher is always better. Typical home buyers will probably find their scores falling between 620 and 800.

FICO makes a huge difference in your interest rate

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 raise my FICO score?

Unfortunately, there isn't a lot you can do to immediately improve your credit score. So called "credit repair" companies advertise quick fixes, but the FICO score is calculated from your lifelong credit history, so it's not possible to raise it significantly in the short term. You must appeal for the credit agency to remove any incorrect reporting on your credit report; this is really the only way to quickly improve your credit score.

How do I find out my credit score?

To improve your FICO score, you've got to obtain 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, fast, and easy to get your credit score as well as reports from all three reporting agencies. Also available are helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report once a year from the three major credit reporting agencies when you visit 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.

Now that you have all the facts, 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 your credit score? Call us at 6507631924.

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Norcal Capital Group, Inc

1369 El Camino Real
Millbrae, CA 94030