You Credit Score: How's Your FICO?

Because we live in a computer-driven world, you're probably not surprised to hear that your creditworthiness comes down to one number. Credit reporting agencies use your history of paying all types of loans in order to create your FICO score.

The three credit reporting 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, the differences aren't huge; they all use the following factors to calculate your credit score:

  • Your Credit History - How long have you had credit?
  • Payment History - Do you have a history of late payments?
  • Balances on your Credit Cards - How many credit card accounts do you have, and how much do you owe?
  • Requests for Credit - How many times have lenders pulled your credit for the purpose of lending you money?

Each of these is assigned a value and a weight. The results are added up and distilled into a single number. Credit scores can be as low as 300 and as high as 800. Higher is always better. Most home buyers probably find their scores between 620 and 800.

FICO makes a huge difference in interest rates

Did you know? 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.

Raising your credit score

Is there any way to improve your credit score? Because the FICO score is entirely based on a lifetime of credit history, it's hard to significantly improve the number with quick fixes. You should, of course, remove any incorrect data on your credit report; this is really the only "quick fix" for credit troubles.

Getting your credit score

In order to improve your score, you've got to have the reports that the agencies use 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 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 free credit report once per year from the three major credit reporting agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is quick and very inexpensive.

Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.

Curious about your FICO score? Call us at 214-663-5355.