FICO Credit Scores: What Do They Mean?

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 can be analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

The three reporting agencies use slightly different formulas to build 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 each of the models considers a range of data available in your credit report, each agency uses the following to build your credit score:

• Your Credit History - Have you had credit for years, or for a short time?
• History of Payments - Do you pay your bills on time?
• Your Credit Card Balances - How many accounts do you have? How much do you owe?
• Requests for Credit - How many times have lenders pulled your credit for the purpose of giving you a loan?

Each of these factors is assigned a value and a weight. The results are added up and distilled into a single number. FICO scores range from 300 to 800. Higher scores are better. Most home buyers have a score above 620.

Your score affects your interest rate

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.

Can I raise my credit score?

What can you do to improve your FICO score? Unfortunately, not much. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should appeal for the credit agency to remove any incorrect data from your credit report, which is the only "quick fix" for credit problems.

How do I find out my credit score?

To raise your credit score, you must have 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 first FICO score, sells credit scores on 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 free credit report once per year from all three agencies at AnnualCreditReport.com. These reports do not include a free score, but it's very inexpensive to get one at the same time.

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 your credit score? Give us a call: 3217777277.