FICO - Your Credit Score

Since our world is so automated, it should come as no surprise that your ability to repay your mortgage boils down to one number. The years of paying your various bills: your mortgage, car payments, and credit card bills are analyzed, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

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 these methods vary from one agency to another, the differences aren't huge; they all use the following in calculating a score:

  • Credit History - How long have you had credit?
  • Payment History - Have you paid more than 30 days late?
  • Your Credit Card Balances - How many credit card accounts do you have, and how much do you owe on them?
  • Inquiries on Your Credit - How many times have you had your credit checked for a loan?

These factors are weighted a little bit differently depending on which formula the agency uses. Each formula produces a single number which may vary slightly from one agency to another. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most home buyers have a score above 620.

Your FICO score affects your monthly payment

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.

Raising your credit score

How can you raise your credit score? Because the credit score is entirely based on your lifelong credit history, it's hard to significantly improve the number with quick fixes. You must appeal for the credit agency to remove any incorrect data on your credit report; this is really the only "quick fix" for credit problems.

How do I find out my FICO score?

In order to raise your FICO score, you must have the reports that are used to build it. Of course, you need the score as well. Fair Isaac, the corporation that offered the original FICO credit score, sells FICO scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score along with reports from all three credit reporting agencies. They also provide helpful information and online tools that help you improve your FICO score.

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

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.

Curious about your FICO score? Give us a call at 5617752724.