How's your FICO Score?

Because our society is so automated, it's probably not that surprising that your ability to repay virtually any loan comes down to a single number. The years of paying your various bills: your mortgage, vehicle payments, and credit card bills are analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

All three major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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 these methods vary, the differences aren't huge; they all use the following factors in building your credit score:

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

These factors are weighted slightly differently depending on which formula the agency uses. Each formula produces a single number which may vary a a little by agency. Credit scores range from 300 to 800. Higher scores are better. Most people who want to get a mortgage loan these days score 620 or above.

Not just for qualifying

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

Is there any way to raise your credit score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you must have incorrect items removed from your credit report.)

Know your FICO score

In order to improve your score, you've got to obtain the reports that are used to build it, and of course, you need the score itself. Fair Isaac, the company that offered the first FICO score, offers 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 reporting agencies. They also provide helpful information and tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once per year from all three agencies when you visit AnnualCreditReport.com. While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.

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

Curious about your FICO score? Call us at 2037296681.

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