How's your FICO Score?

Because our world is so computer-driven, you're probably not surprised to hear that your ability to repay virtually any loan comes down to one number. Credit reporting agencies use your loan payment history to compile this score.

All three major credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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, the differences aren't huge; they all use the following in building a score:

• Credit History - How long have you had credit?
• Late Payments - Do you have any payments later than 30 days?
• Balances on your Credit Cards - How many accounts do you hold, and how much do you owe on them?
• Requests for Credit - How many times have lenders pulled your credit for the purpose of giving you 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. Most borrowers getting a mortgage loan in the current environment score 620 or above.

Not just for qualifying

Did you know? Credit 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

How can you improve your FICO score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you must have incorrect items removed from your credit report.)

Getting your FICO score

Before you can improve your credit score, you have to know your score and ensure that the reports from each credit reporting agency are correct. Fair Isaac, the corporation that offered the first FICO score, offers credit scores on myFICO.com. It's inexpensive to get your FICO from all three reporting agencies, along with your credit report. They also provide helpful information and online tools that can help you improve your FICO score.

You can get a free credit report once per year from all three agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is quick and very inexpensive.

Armed with this info, you will be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.

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