About the FICO Credit Score

Since we live in an computer-driven world, it should come as no surprise that your ability to repay your mortgage comes down to a single number. This score is built by credit reporting agencies. They use the payment history from your various loans: mortgages, car/motorcycle/boat loans, credit cards, and others.

Each of the three credit agencies has its own formula for building your credit 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 the formulas vary from one agency to another, the differences aren't huge; each agency uses the following to calculate a score:

• Your Credit History - How many years have you had credit?
• Payment History - Have you paid more than 30 days late?
• Credit Card Balances - How many accounts do you carry? How much do you owe?
• Requests for Credit - How many times have lenders pulled your credit report for the purpose of lending you money?

These factors are weighted differently depending 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 scores are better. Most home buyers have a score above 620.

Not just for qualifying

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.

Raising your credit score

How can you raise your FICO score? Because the FICO score is entirely based on your lifelong credit history, it is difficult to change it quickly. (Of course you can and should appeal incorrect items on your credit report.)

Know your FICO

To improve your score, you've got to get the reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac, the company that invented the first FICO score, sells FICO scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three agencies. They also provide information and tools that can help you improve your FICO score.

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

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 your credit score? Call us at 7184417000.