FICO - Your Credit Score

Since we live in an computer-driven world, it should come as no surprise that your ability to repay your mortgage boils down to just one number. The years of paying your various bills: your mortgage, vehicle payments, and credit card bills are analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

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

• Credit History - How long have you had credit?
• Payment History - Do you have a history of late payments?
• Balances on your Credit Cards - How many accounts do you have, and 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 differently depending on which formula the agency uses. The result is one number. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Most home buyers have a score above 620.

Not just for qualifying

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

Raising your credit score

How can you improve your credit score? Because the FICO score is based on your lifelong credit history, it is difficult to make a significant improvement in the score with quick fixes. You should, of course, remove any incorrect data from your credit report; this is the only way to quickly improve your credit score.

How do I find out my FICO score?

To raise your FICO score, you've got to have the credit reports that the agencies use to build it, and of course, you need the score itself. 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 from all three reporting agencies, along with your credit report. They also provide helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once a year from the three major credit reporting 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.

Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.

Want to know more about your credit score? Call us: 6507631924.