How's your FICO Score?

Since we live in an computer-driven world, it's not surprising that your ability to repay your mortgage comes down to a single number. The years of paying your various bills: your mortgage, vehicle payments, and credit card bills are analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

The three credit reporting agencies use slightly different formulas to build a 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 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 in calculating a credit score:

• Credit History - How many years have you had credit?
• Payment History - Do you have a history of late payments?
• Balances on your Credit Cards - How many accounts do you have, and how much do you owe on them?
• 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 result is a single number: your FICO score. Credit scores range from 300 to 800. Higher is always better. Most home buyers these days have a score above 620.

Not just for qualifying

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.

Improving your score

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

Getting your FICO score

To raise your score, you've got to get 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. For a reasonable fee, you can get your FICO from all three agencies, along with your credit report. Also available are helpful information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once a year from all three credit reporting agencies by visiting AnnualCreditReport.com. While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.

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? Give us a call: 5626935048.