About the FICO Credit Score

Because our society is so automated, you're probably not surprised to hear that your ability to repay virtually any loan comes down to one number. Credit reporting agencies use your payment history to compile your FICO score.

All three credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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 these methods vary, each agency uses the following to determine your score:

  • Your Credit History - Have you had credit for many years, or for a short time?
  • Payment History - Have you paid more than 30 days late?
  • Balances on your Credit Cards - How many accounts? How much do you owe on your accounts?
  • Requests for Credit - How many times have you had your credit checked for a loan?

Each of these is assigned a value and a weight. The results are added up and distilled into a single number. Credit scores can be as low as 300 and as high as 800. Higher is always better. Most home buyers these days have a score above 620.

Your FICO score greatly affects your monthly payment

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 a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

What can you do about your FICO score? Very little in the short term. Because the credit score is based on your lifelong credit history, it's difficult to significantly improve the score with quick fixes. (Of course you must appeal incorrect items on your credit report.)

Know your FICO

Before you can improve your score, you must know your score and be sure that the reports from each agency are correct. Fair Isaac, the company that invented the original FICO score, sells scores on its website: myFICO.com. It's inexpensive to get your FICO from all three reporting agencies, along with your credit report. They also provide helpful information and tools that can help you improve your FICO score.

You can get a federally-mandated free credit report every year from the three major credit reporting agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is quick and very inexpensive.

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

Curious about your FICO score? Give us a call at (321) 777-7277.

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