You Credit Score: How's Your FICO?

Since we live in an computer-driven world, it should come as no surprise that your ability to repay your mortgage comes down to a single number. Credit reporting agencies use your payment history to create this score.

Equifax, TransUnion, and Experian, the three major credit reporting agencies, each have a proprietary formula for building a credit score. The original FICO score 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, each agency uses the following to determine your score:

  • Credit History - Have you had credit for years, or for just a short time?
  • History of Payments - Do you have any payments later than 30 days?
  • Your Credit Card Balances - How many accounts do you carry? How much do you owe on your accounts?
  • Requests for Credit - How many times have lenders pulled your credit for the purpose of lending you money?

These factors are weighted slightly differently depending on the formula being used. The results are added up and distilled into a single number. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most folks getting a mortgage loan in the current environment score 620 or above.

Your score greatly affects your monthly payment

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.

Improving your score

Is it possible to raise your FICO score? Because the FICO score is based on a lifetime of credit history, it is difficult to change it quickly. (Of course you can and should remove incorrect data on your credit report.)

Getting your credit score

Before you can improve your FICO score, you have to get your score and make certain that the credit reports from each agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to get your FICO from all three agencies, along with your credit report. They also provide helpful information and tools that help you improve your credit score.

You can get a federally-mandated free credit report every 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.

Curious about credit scores? Call us: 5617752724.