FICO - Your Credit Score

Since our society is so automated, you're probably not surprised to hear that your ability to repay virtually any loan boils down to one number. The years of paying your various bills: your mortgage, car 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.

TransUnion, Equifax, and Experian, the three major credit 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 these methods vary from one agency to another, all of the agencies use the following to calculate your credit score:

• Credit History - How long have you had credit?
• Payment History - Have you paid more than 30 days late?
• Credit Card Balances - How many accounts? How much do you owe?
• Credit Inquiries - How many times have lenders pulled your credit report for the purpose of giving you a loan?

These factors are assigned weights based on the formula being used. The result is one number. Credit scores range from 300 to 800. Higher scores are better. Most home buyers probably find their credit scores falling between 620 and 800.

FICO makes a huge difference in your interest rate

FICO scores affect more than your ability to get a loan. They also affect your interest rate. Lenders give lower interest rates to individuals with higher scores.

Improving your score

Is there any way to improve your FICO score? Because the score is entirely based on your lifelong credit history, it's hard to change it quickly. (Of course you must appeal incorrect items on your credit report.)

How do I find out my credit score?

Before you can improve your score, you have to obtain your score and be sure that the reports from each agency are correct. Fair Isaac, the company that offered the first FICO score, sells scores on its website: myFICO.com. For a reasonable fee, you can get your FICO from all three agencies, along with your credit report. They also provide information and tools that can help you understand how to improve your credit score.

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

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 credit scores? Give us a call: 4056158543.