You Credit Score- How's Your FICO?
Since we live in an computer-driven society, it's not surprising that your ability to repay your mortgage comes down to just one number.
Credit reporting agencies use your loan payment history in order to build this score.
Each of the three credit reporting agencies has its own formula for building your credit score. The original FICO score was developed by Fair Isaac and Company.
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, all of the agencies use the following to determine your credit score:
- Credit History - How long have you had credit?
- Late Payments - Do you pay your bills on time?
- Balances on your Credit Cards - How many credit card accounts do you hold, and how much do you owe?
- Requests for Credit - How many times have you had your credit checked for a loan?
These factors are weighted a little bit differently depending on the formula being used. Each formula produces a single number which may vary a a little from one agency to another. FICO scores can be as low as 300 and as high as 800. Higher is better. Most home buyers these days have a score above 620.
Your FICO score affects your monthly payment
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.
Raising your credit score
Unfortunately, there isn't a lot you can do to immediately improve your credit score. Because the score is based on a lifetime of credit history, it's difficult to make a significant improvement in the number with quick fixes. You must, of course, remove any incorrect reporting from your credit report, which is the only way to quickly improve your credit score.
How do I find out my FICO score?
Before you can improve your score, you have to know your score and ensure that the reports from each credit reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive, fast, and easy to get your credit score along with credit reports from all three agencies. They also provide helpful information and online tools that can help you analyze what actions might have the greatest impact on your FICO score.
You can get a free credit report every year from the three major credit reporting agencies when you visit AnnualCreditReport.com. These reports do not include a free score, but it's very inexpensive to get one at the same time.
Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.
Curious about your FICO score? Call us: 214-663-5355.