FICO - Your Credit Score

Because our world is so automated, it's probably not that surprising that your ability to repay virtually any loan comes down to one number. The years of paying your various bills: your mortgage, car payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

All three credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. Fair Isaac and Cooriginally developed this score. . Experian uses this model and calls its score FICO. Equifax's model, based on FICO, is called BEACON, while TransUnion, which also uses a slightly modified FICO, calls its score 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 in calculating a score:

  • Credit History - How long have you had credit?
  • Late Payments - Do you have a history of late payments?
  • Your Credit Card Balances - How many credit card accounts do you have, and how much do you owe?
  • Credit Inquiries - How many times have lenders pulled your credit report for the purpose of giving you a loan?

These factors are assigned weights based on the formula being used. The result is a single number: your FICO score. FICO scores can be as low as 300 and as high as 800. Higher is better. Most home buyers in the current environment have a score above 620.

Your score affects your interest rate

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.

Can I raise my FICO score?

Is there any way to improve your FICO score? Despite what you hear from "credit repair" companies, the FICO score is formulated from your lifelong credit history, so it's not possible to raise it significantly in the short term. (Of course you must remove incorrect data on your credit report.)

Know your FICO

Before you can improve your score, you must obtain your score and ensure that the reports from each 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 as well as credit reports from all three reporting agencies. Also available are 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 federally-mandated free credit report every year from all three agencies at 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 obtain the most favorable mortgage.

Want to know more about your FICO score? Call us at 2146635355.