About the FICO Credit Score
Since our society is so automated, it's probably not that surprising that your creditworthiness boils down to one number.
Credit reporting agencies use your history of paying loans to create this score.
The three reporting agencies use slightly different formulas to build a credit score. Fair Isaac and Cooriginally developed this score. .
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, the differences aren't huge; each agency uses the following factors in building your credit score:
- Credit History - Have you had credit for many years, or for a short time?
- Late Payments - Do you pay your bills on time?
- Balances on your Credit Cards - How many accounts do you hold? How much do you owe on your accounts?
- Requests for Credit - How many times have lenders pulled your credit report for the purpose of giving you a loan?
These factors are assigned weights based on the formula being used. The result is one number. Credit scores range from 300 to 800. Higher scores are better. Most home buyers likely find their FICO scores above 620.
Your credit score 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.
Raising your FICO score
Unfortunately, there isn't a lot you can do to immediately improve your credit score. Because the score is entirely based on a lifetime of credit history, it is hard to make a significant improvement in the score with quick fixes. You should, of course, remove any incorrect data on your credit report; this is really the only way to quickly improve your credit score.
How do I find out my FICO score?
Before you can improve your score, you have to know your score and make certain that the reports from each reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three credit reporting agencies. They also provide helpful information and tools that can help you improve your credit score.
You can get a free credit report every year from all three 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 obtain the most favorable mortgage.
Curious about your FICO score? Call us: 5617752724.