You Credit Score- How's Your FICO?
Because our world is so computer-driven, it's probably not that surprising that your creditworthiness boils down to one number.
All the years you've been paying your various bills: your mortgage, car payments, and credit card bills are analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.
The three credit reporting agencies use slightly different formulas to build 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 the formulas vary, each agency uses the following to determine a credit score:
- Credit History - Have you had credit for many years, or for just a short time?
- Payment History - Do you pay your bills on time?
- Credit Card Balances - How many accounts do you have? How much do you owe on your accounts?
- Requests for Credit - How many times have you had your credit checked for a loan?
These factors are weighted differently depending on which formula the agency uses. Each formula produces a single number which varies slightly from one agency to another. Credit scores range from 300 to 800. Higher is better. Most home buyers likely find their FICO scores falling above 620.
FICO makes a difference in interest rates
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
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 built on your lifetime credit history, so it's not possible to raise it significantly in the short term. (Of course you must remove incorrect data on your credit report.)
How do I find out my FICO score?
Before you can improve your FICO score, you have to obtain your score and ensure that the reports from each credit reporting agency are correct. Fair Isaac, the corporation that invented the original FICO credit score, offers scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score along with credit reports from all three agencies. They also provide information and tools that can help you analyze what actions might have the greatest impact on your FICO score.
You can get a free credit report once a year from the three major agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it 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 your FICO score? Call us at 2037296681.