About the FICO Credit Score

Since we live in an automated, it should come as no surprise that your creditworthiness comes down to a single number. This score is built by credit agencies. These agencies use the payment history from all of your loans: credit cards, mortgages, car loans and the like.

TransUnion, Equifax, and Experian, the three major credit reporting agencies, each have their own proprietary formula for building your credit score. The original FICO 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; they all use the following factors in building a score:

  • Your Credit History - Have you had credit for years, or for a short time?
  • Late Payments - Do you have a history of late payments?
  • Balances on your Credit Cards - How many accounts? How much do you owe on your accounts?
  • Credit Inquiries - How many times have lenders pulled your credit for the purpose of lending you money?

These factors are weighted differently depending on which formula the agency uses. The result is one number. FICO scores range from 300 to 800. Higher scores are better. Most people who want to get a mortgage loan these days score 620 or above.

Not just for qualifying

FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

Can I improve my credit score?

How can you improve your credit score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should remove any incorrect reporting from your credit report; this is really the only "quick fix" for credit troubles.

How do I find out my FICO score?

In order to improve your FICO score, you've got to have the credit reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac, the corporation that offered the first FICO score, offers FICO scores on its website: myFICO.com. For a reasonable fee, you can get your FICO from all three reporting agencies, along with your credit report. They also provide helpful information and online tools that help you improve your credit score.

You can get a federally-mandated free credit report every year from all three agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is quick and inexpensive.

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

Curious about credit scores? Call us: 5626935048.

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