Scoring your Credit - How's your FICO?

Since we live in an automated society, it should come as no surprise that your ability to repay your mortgage loan comes down to a single number. All the years you've been paying your various bills: your mortgage, car payments, and credit card bills are analyzed, 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 credit 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 these methods vary, each agency uses the following to build your credit score:

• Credit History - Have you had credit for many years, or for a short time?
• Late Payments - Have you paid more than 30 days late?
• Your Credit Card Balances - How many accounts? How much do you owe?
• Inquiries on Your Credit - How many times have lenders pulled your credit report for the purpose of lending you money?

Each of these is assigned a value and a weight. 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.

FICO makes a difference in your interest rate

Credit scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

Can I improve my FICO score?

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you must remove incorrect data on your credit report.)

Getting your FICO score

In order to raise your FICO score, you must obtain the credit reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the company that invented the original FICO score, offers FICO scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three credit reporting agencies. They also provide information and tools that help you improve your FICO score.

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

Armed with this info, you will be a more informed consumer and you'll be better positioned to get the right mortgage for you.

Curious about your FICO score? Give us a call at 3217777277.