You Credit Score: How's Your FICO?

Since we live in an automated world, it should come as no surprise that your ability to repay your mortgage comes down to a single number. Credit reporting agencies use your history of paying all types of loans to create this score.

All three credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at 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 each of the models considers a range of data available in your credit report, the differences aren't huge; each agency uses the following factors in calculating your credit score:

• Your Credit History - Have you had credit for many years, or for just a short time?
• History of Payments - Do you have a history of late payments?
• Balances on your Credit Cards - How many accounts do you hold? How much do you owe on your accounts?
• Credit Inquiries - How many times have you had your credit checked for 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 home buyers these days have a score above 620.

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.

Can I improve my credit score?

Is it possible to improve your credit score? So called "credit repair" companies advertise quick fixes, but the score is based on your lifetime credit history, so it's not possible to raise it significantly in the short term. You must, of course, appeal for the credit agency to remove any incorrect reporting on your credit report; this is the only way to quickly improve your credit score.

How do I find out my FICO score?

Before you can improve your score, you must obtain your score and make sure that the credit reports from each credit reporting agency are correct. Fair Isaac, the corporation that offered the first FICO credit score, sells 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. They also provide information and tools that help you understand how to improve your FICO score.

You can get a free credit report once per year from the three major agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast and very inexpensive.

Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to get the right mortgage for you.

Want to know more about credit scores? Call us at 2037296681.