About the FICO Credit Score

Because we live in a computer-driven world, you're probably not surprised to hear that your ability to repay your mortgage loan boils down to a single number. The FICO score is compiled by credit reporting agencies. These agencies use the payment history of your various loans: mortgages, car/motorcycle/boat loans, credit cards, and the like.

Each of the three credit agencies has its own formula for building your credit score. The original FICO 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; all of the agencies use the following factors to calculate a credit score:

  • Credit History - How many years have you had credit?
  • Late Payments - Do you have any payments later than 30 days?
  • Your Credit Card Balances - How many credit card accounts do you hold, and how much do you owe?
  • Requests for Credit - How many times have lenders pulled your credit for the purpose of lending you money?

These factors are assigned weights based on the formula being used. Each formula produces a single number which varies slightly from one agency to another. FICO scores can be as low as 300 and as high as 800. Higher scores are better. Most borrowers who want to get a mortgage in the current environment 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.

Can I raise my FICO 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 built on your lifetime credit history, so you can't turn it around right away. You should, of course, remove any incorrect reporting on your credit report; this is really the only "quick fix" for credit problems.

Getting your credit score

Before you can improve your score, you must know your score and make certain that the credit reports from each agency are correct. Fair Isaac, the company that invented the first FICO credit score, offers credit 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 online tools that help you improve your FICO score.

You can get a federally-mandated free credit report once a year from the three major agencies by visiting AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.

Armed with this information, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Want to know more about your FICO score? Give us a call at 214-663-5355.