You Credit Score- How's Your FICO?

Because we live in a computer-driven world, it should come as no surprise that your creditworthiness boils down to a single number. The FICO score is compiled by credit reporting agencies. They use the payment history of your various loans: credit cards, mortgages, car/boat loans and the like.

Each of the three credit reporting agencies has its own formula for building your credit 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 the formulas vary, the differences aren't huge; they all use the following factors to build your score:

  • Your Credit History - How long have you had credit?
  • Payment History - Do you pay your bills on time?
  • Your Credit Card Balances - How many accounts do you hold? How much do you owe?
  • Credit Inquiries - How many times have you had your credit checked for a loan?

Each of these factors is assigned a value and a weight. The results are added up and distilled into a single number. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Typical home buyers will likely find their credit scores falling between 620 and 800.

Your score greatly affects your interest rate

Did you know? 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.

Improving your score

What can you do to improve your FICO score? Unfortunately, not much. Since the FICO score is entirely based on a lifetime of credit history, it's very difficult to change it quickly. (Of course you can and should remove incorrect data on your credit report.)

Know your FICO score

Before you can improve your score, you have to know your score and ensure that the reports from each agency are correct. Fair Isaac, the company that invented the first FICO score, sells scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three agencies. Also available are helpful information and tools that can help you improve your credit score.

You can get a free credit report once per year from all three agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one 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 get the most favorable mortgage.

Want to know more about credit scores? Give us a call: 5617752724.