About the FICO Credit Score

Since we live in an automated society, it's not surprising that your ability to repay your mortgage boils down to a single number. The years of paying your various bills: your mortgage, vehicle payments, and credit card bills are analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Equifax, TransUnion, and Experian, the three major credit reporting agencies, each have a proprietary formula for building 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; all of the agencies use the following in calculating a score:

• Your Credit History - Have you had credit for many years, or for just a short time?
• Payment History - Do you have any payments later than 30 days?
• Balances on your Credit Cards - How many credit card accounts do you have, and how much do you owe on them?
• Credit Inquiries - How many times have lenders pulled your credit report for the purpose of lending you money?

These factors are weighted a little bit differently depending on the formula being used. 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 home buyers have a score above 620.

Not just for qualifying

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.

Improving your score

How can you raise your FICO score? Despite what you hear from "credit repair" companies, the FICO score is built on your lifetime credit history, so you can't turn it around right away. (Of course you can and should appeal incorrect items on your credit report.)

Know your FICO score

In order to raise your credit score, you've got to have the reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the corporation that invented the original FICO credit score, sells credit scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three credit reporting agencies. Also available are information and tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once a year from all three credit reporting agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is quick and inexpensive.

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

Want to know more about credit scores? Give us a call: 7184417000.