About the FICO Credit Score

Since we live in a computer-driven society, it's probably not that surprising that your creditworthiness boils down to a single number. The years of paying your various bills: your mortgage, vehicle payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Equifax, TransUnion, and Experian, the three major credit agencies, each have their own proprietary formula for building your 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 the formulas vary from one agency to another, the differences aren't huge; each agency uses the following factors to calculate your score:

  • Your Credit History - How many years have you had credit?
  • Payment History - Do you have any payments later than 30 days?
  • Balances on your Credit Cards - How many accounts do you have? How much do you owe on your accounts?
  • Requests for Credit - How many times have you had your credit checked for a loan?

These factors are weighted a little bit differently depending on the formula being used. Each formula produces a single number which may vary a a little from one agency to another. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Most home buyers in the current environment have a score above 620.

Your score affects how much you pay in interest every month

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

Improving your 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. You should, of course, remove any incorrect data on your credit report; this is really the only way to quickly improve your credit score.

Getting your FICO score

To raise your score, you've got to get the reports that are used to build it, and of course, you need the score itself. Fair Isaac, the corporation that invented the original FICO credit score, sells credit scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score along with credit reports from all three agencies. Also available are helpful information and tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report once per year from all three agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is quick and very inexpensive.

Armed with this information, you'll be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Want to know more about your credit score? Call us: 3217777277.

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