You Credit Score- How's Your FICO?

Since we live in an computer-driven world, it should come as no surprise that your ability to repay your mortgage comes down to a single number. Credit reporting agencies use your loan payment history to create this score.

The three agencies use slightly different formulas to build a 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 each of the models considers a range of data available in your credit report, all of the agencies use the following to calculate your credit score:

• Your Credit History - How many years have you had credit?
• History of Payments - Do you have a history of late payments?
• Balances on your Credit Cards - How many accounts do you carry? How much do you owe?
• Inquiries on Your Credit - How many times have you had your credit checked for a loan?

Each of these factors is assigned a value and a weight. Each formula produces a single number which varies slightly by agency. Credit scores range from 300 to 800. Higher scores are better. Most home buyers have a score above 620.

Your FICO score affects your interest rate

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.

Improving your score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. So called "credit repair" companies advertise quick fixes, but the FICO score is calculated from your lifetime credit history, so you can't turn it around right away. You should, of course, remove any incorrect data from your credit report, which is the only "quick fix" for credit problems.

How do I find out my credit score?

In order to improve your FICO score, you've got to obtain the credit reports that the agencies use 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 score from all three agencies, along with your credit report. They also provide helpful information and tools that help you understand how to improve your credit score.

You can get a federally-mandated free credit report once per year from all three credit reporting 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.

Armed with this info, 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 credit scores? Call us at 4056158543.