FICO - Your Credit Score
Because our society is so computer-driven, it's probably not that surprising that your creditworthiness comes down to one number.
Credit reporting agencies use your history of paying all types of loans in order to compile a FICO score.
Equifax, TransUnion, and Experian, the three major credit reporting agencies, each have their own proprietary formula for building your 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 the formulas vary, the differences aren't huge; all of the agencies use the following factors in calculating your credit score:
- Credit History - Have you had credit for many years, or for a short time?
- Payment History - Do you have any payments later than 30 days?
- Credit Card Balances - 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?
These factors are assigned weights based on the formula being used. Each formula produces a single number which may vary slightly by agency. Credit scores range from 300 to 800. Higher scores are better. Most people who want to get a mortgage have a score above 620.
Not just for qualifying
Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.
Raising your FICO score
Is there any way to improve your FICO score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You must remove any incorrect data from your credit report; this is really the only way to quickly improve your credit score.
Getting your FICO score
In order to raise your FICO score, you must get the reports that are used to build it, and of course, you need the score itself. Fair Isaac, the corporation that offered the first FICO credit score, offers FICO scores on myFICO.com. For a reasonable fee, you can get your FICO score from all three reporting agencies, along with your credit report. Also available are information and tools that can help you improve your credit score.
You can get a free credit report once a year from the three major agencies at 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 will 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: 4056158543.