Scoring your Credit - How's your FICO?

Since we live in an automated, it's probably not that surprising that your creditworthiness comes down to one number. Credit reporting agencies use your payment history to compile a FICO score.

The three agencies use slightly different formulas to build a 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 these methods vary, the differences aren't huge; each agency uses the following in building your score:

  • Your Credit History - Have you had credit for many years, or for a short time?
  • Late Payments - Do you have a history of late payments?
  • Balances on your Credit Cards - How many credit card accounts do you have, and how much do you owe?
  • Requests for Credit - How many times have you had your credit checked for a loan?

These factors are assigned weights based on the formula being used. Each formula produces a single number which may vary slightly by agency. Credit scores can be as low as 300 and as high as 800. Higher is always better. Most borrowers getting a mortgage loan have a score above 620.

Not just for qualifying

Did you know? FICO scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.

Raising your FICO score

Is there any way to raise your FICO score? Because the FICO score is entirely based on your lifelong credit history, it's hard to make a significant improvement in the score with quick fixes. You must, 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?

To raise your credit score, you've got to get the credit reports that are used 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. It's inexpensive to quickly get your FICO score from all three reporting agencies, along with your credit report. They also provide helpful information and tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once per year from all three agencies when you visit AnnualCreditReport.com. These reports do not include a free score, but it's very inexpensive to get one at the same time.

Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to get the right mortgage for you.

Curious about your FICO score? Call us: 5617752724.