FICO - Your Credit Score

Because we live in an automated, you're probably not surprised to hear that your creditworthiness comes down to a single number. The FICO score is built by credit agencies. These agencies use the payment history from your various loans: credit cards, mortgages, car loans and the like.

All three credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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 build a credit score:

  • Your Credit History - How many years have you had credit?
  • History of Payments - Have you paid more than 30 days late, and how often?
  • Your Credit Card Balances - How many accounts do you carry? How much do you owe on your accounts?
  • Credit Inquiries - How many times have lenders pulled your credit report for the purpose of lending you money?

These factors are weighted slightly 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 range from 300 to 800. Higher scores are better. Typical home buyers probably find their credit scores above 620.

Your credit score affects how much you pay in interest every month

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

What can you do about your FICO score? Very little in the short term. So called "credit repair" companies advertise quick fixes, but the score is formulated from your lifetime credit history, so you can't turn it around right away. You must remove any incorrect reporting from your credit report; this is the only "quick fix" for credit troubles.

How do I find out my credit score?

To improve your credit score, you must obtain the credit 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 information and online tools that can help you improve your credit score.

You can get a federally-mandated free credit report once a year from the three major credit reporting agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is fast and inexpensive.

Now that you have all the facts, 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: 2146635355.