You Credit Score- How's Your FICO?

Since we live in an automated society, it should come as no surprise that your ability to repay your mortgage boils down to just one number. Credit reporting agencies use your history of paying all types of loans in order to build a FICO score.

Experian, TransUnion, and Equifax, the three major credit reporting agencies, each have their own proprietary formula for building your credit score. The original FICO score 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, all of the agencies use the following to calculate a credit score:

• Credit History - How many years have you had credit?
• Late Payments - Do you have a history of late payments?
• Balances on your Credit Cards - How many accounts do you carry? How much do you owe?
• Requests for Credit - How many times have lenders pulled your credit report for the purpose of giving you a loan?

These factors are assigned weights based on the formula being used. 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 borrowers getting a mortgage have a score above 620.

Not just for qualifying

Did you know? FICO 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

Is there any way to improve your FICO score? So called "credit repair" companies advertise quick fixes, but the score is built on your lifelong credit history, so it's not possible to raise it significantly in the short term. (Of course you must appeal incorrect items on your credit report.)

Getting your credit score

To raise your FICO score, you must 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. It's inexpensive, fast, and easy to get your credit score along with reports from all three credit reporting agencies. Also available are information and tools that can help you understand how to improve your FICO score.

You can get a federally-mandated free credit report once a year from the three major agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is fast and very inexpensive.

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

Curious about your credit score? Give us a call: 3217777277.