You Credit Score: How's Your FICO?

Since our society is so automated, you're probably not surprised to hear that your ability to repay your mortgage comes down to one number. All the years you've been 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.

Each of the three credit reporting agencies has its own formula for building your 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, all of the agencies use the following to determine a score:

  • Your Credit History - Have you had credit for years, or for just a short time?
  • Late Payments - Do you have any payments later than 30 days?
  • Balances on your Credit Cards - How many accounts do you hold, and how much do you owe?
  • 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 results are added up and distilled into a single number. FICO scores range from 300 to 800. Higher is always better. Most home buyers these days have a score above 620.

Your FICO score greatly affects your interest rate

FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

Is it possible to raise your credit score? So called "credit repair" companies advertise quick fixes, but the FICO score is based on your lifetime credit history, so it's not possible to raise it significantly in the short term. You must appeal for the credit agency to remove any incorrect reporting from your credit report; this is the only "quick fix" for credit troubles.

How do I find out my FICO score?

Before you can improve your credit score, you must get your score and be sure that the credit reports from each agency are correct. 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 credit reports from all three agencies. Also available are helpful information and tools that help you understand how to improve your FICO score.

You can get a federally-mandated free credit report every year from all three agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is quick and inexpensive.

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

Curious about your FICO score? Give us a call: 8327302000.

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