You Credit Score- How's Your FICO?

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Since we live in an automated world, it's not surprising that your ability to repay your mortgage boils down to just one number. Credit reporting agencies use your history of paying all types of loans to create this score.

Each of the three credit reporting agencies has its own formula for building your credit score. The original FICO model was developed by Fair Isaac and Company. 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, the differences aren't huge; they all use the following factors in calculating your score:

  • Your Credit History - How long have you had credit?
  • History of Payments - Do you have any payments later than 30 days?
  • Credit Card Balances - How many credit card accounts do you hold, and how much do you owe?
  • Credit Inquiries - How many times have lenders pulled your credit for the purpose of giving you a loan?

These factors are weighted a little bit differently depending on the formula being used. 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 difference in 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.

Raising your FICO score

Is there any way to raise your credit score? Despite what you hear from "credit repair" companies, the FICO score is based on your lifetime credit history, so you can't turn it around right away. (Of course you can and should appeal incorrect items on your credit report.)

Getting your FICO score

In order to improve your score, you've got to get the reports that are used to build it. Of course, you need the score as well. 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 reporting agencies, along with your credit report. Also available are helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once per year from all three 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 information, you'll be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.

Want to know more about credit scores? Give us a call: (913) 498-8589.