You Credit Score- How's Your FICO?

Since our world is so automated, it should come as no surprise that your ability to repay virtually any loan comes down to a single number. This score is created by credit agencies. They use the payment history of all of your loans: mortgages, car loans, credit cards, and the like.

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 from one agency to another, all of the agencies use the following to build a credit score:

  • Your Credit History - How many years have you had credit?
  • History of Payments - Have you paid more than 30 days late?
  • Balances on your Credit Cards - How many accounts? How much do you owe on your accounts?
  • Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of giving you a loan?

These factors are assigned weights based on the formula being used. The results are added up and distilled into a single number. FICO scores can be as low as 300 and as high as 800. Higher is better. Most folks getting a mortgage have a score above 620.

Not just for qualifying

Credit scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Raising your FICO score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. So called "credit repair" companies advertise quick fixes, but the FICO score is based on your lifelong credit history, so it's not possible to raise it significantly in the short term. You should, of course, appeal for the credit agency to remove any incorrect reporting from your credit report; this is the only "quick fix" for credit problems.

How do I find out my credit score?

Before you can improve your FICO score, you have to get your score and make certain that the credit reports from each agency are correct. Fair Isaac, the company that offered the original FICO score, sells FICO scores on its website: 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 helpful information and tools that can help you understand how to improve your credit score.

You can get a federally-mandated free credit report once per year from all three agencies by visiting 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 obtain the most favorable mortgage.

Want to know more about your FICO score? Call us at 7184417000.

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