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 loan comes down to a single number. Credit reporting agencies use your loan payment history in order to compile a FICO score.

Each of the three credit agencies has its own formula for building your credit score. The original FICO model was developed by Fair Isaac and Company. 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 these methods vary, the differences aren't huge; all of the agencies use the following in building a credit score:

• Credit History - How long have you had credit?
• History of Payments - Do you have any payments later than 30 days?
• Credit Card Balances - How many accounts do you hold? How much do you owe?
• Requests for Credit - How many times have lenders pulled your credit for the purpose of giving you a loan?

These factors are assigned weights based on the formula being used. The result is one number. FICO scores range from 300 to 800. Higher is better. Most home buyers will probably find their FICO scores falling above 620.

Your credit score greatly affects your interest rate

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 FICO score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you must appeal incorrect items on your credit report.)

How do I find out my FICO score?

Before you can improve your credit score, you have to get your score and ensure that the credit reports from each agency are correct. Fair Isaac, the company that offered the first FICO credit score, offers scores on its website: myFICO.com. 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 analyze what actions might have the greatest impact on your FICO score.

You can get a 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 obtain the right mortgage for you.

Want to know more about your credit score? Give us a call: 5626935048.