Scoring your Credit - How's your FICO?

Because our world is so computer-driven, it should come as no surprise that your creditworthiness boils down to a single number. The years of paying your various bills: your mortgage, vehicle payments, and credit card bills are analyzed, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Each of the three credit 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 from one agency to another, the differences aren't huge; they all use the following factors to build your credit score:

• Credit History - How many years have you had credit?
• Late Payments - Do you have a history of late payments?
• Credit Card Balances - How many accounts? How much do you owe on your accounts?
• Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of lending you money?

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

FICO makes a huge difference in interest rates

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.

Improving your score

Is it possible to 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.)

How do I find out my FICO score?

In order to raise your score, you must have the reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac, the company that invented the original FICO credit score, sells scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three reporting agencies. They also provide information and online tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report every year from the three major credit reporting agencies when you visit AnnualCreditReport.com. While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.

Now that you have all the facts, 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: 4056158543.