You Credit Score: How's Your FICO?

Since our world is so automated, you're probably not surprised to hear that your ability to repay your mortgage comes down to a single number. The years of paying your various bills: your mortgage, car 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.

All three credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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 each of the models considers a range of data available in your credit report, each agency uses the following to build a score:

  • Credit History - Have you had credit for many years, or for just a short time?
  • Late Payments - Do you have any payments later than 30 days?
  • Balances on your Credit Cards - How many accounts do you have, and how much do you owe?
  • Requests for Credit - How many times have you had your credit checked for a loan?

These factors are weighted differently depending on which formula the agency uses. The results are added up and distilled into a single number. FICO scores can be as low as 300 and as high as 800. Higher scores are better. Most home buyers have a score above 620.

Your FICO score greatly affects your interest rate

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 raise your FICO score? Unfortunately, not much. Since the FICO score is entirely based on a lifetime of credit history, it's difficult to change it quickly. (Of course you must appeal incorrect items on your credit report.)

How do I find out my FICO score?

Before you can improve your credit score, you must obtain your score and be sure that the credit reports from each credit 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 get your FICO score from all three reporting agencies, along with your credit report. They also provide helpful information and 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 by visiting 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 credit scores? Call us at 6507631924.

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Norcal Capital Group, Inc

1369 El Camino Real
Millbrae, CA 94030