How's your FICO Score?
Because we live in a computer-driven society, you're probably not surprised to hear that your creditworthiness comes down to one number.
Credit reporting agencies use your loan payment history in order to create a FICO score.
The three agencies use slightly different formulas to build a credit score. Fair Isaac and Cooriginally developed this score. .
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 each of the models considers a range of data available in your credit report, the differences aren't huge; each agency uses the following factors in building a score:
- Credit History - How many years have you had credit?
- Late Payments - Do you pay your bills on time?
- Your Credit Card Balances - How many credit card accounts do you have, and how much do you owe on them?
- Inquiries on Your Credit - How many times have you had your credit checked for a loan?
Each of these is assigned a value and a weight. The result is a single number: your credit score. FICO scores range from 300 to 800. Higher is better. Most borrowers getting a mortgage in the current environment score 620 or above.
Not just for qualifying
Did you know? Credit 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.
Raising your FICO score
Unfortunately, there isn't a lot you can do to immediately improve your credit score. Because the FICO score is entirely based on your lifelong credit history, it's difficult to change it quickly. (Of course you must have incorrect items removed from your credit report.)
Getting your FICO score
In order to raise your credit score, you must have the credit reports that are used 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 to quickly get your FICO from all three agencies, along with your credit report. Also available are helpful information and tools that help you understand how to improve your credit score.
You can get a federally-mandated free credit report every year from all three credit reporting agencies at AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.
Armed with this information, you'll be a more informed consumer and you'll be better positioned to get the right mortgage for you.
Want to know more about your credit score? Give us a call: 8327302000.