About the FICO Credit Score

Since we live in an computer-driven society, it's not surprising that your ability to repay your mortgage loan boils down to just one number. Credit reporting agencies use your loan payment history in order to create a FICO score.

Each of the three credit reporting 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 each of the models considers a range of data available in your credit report, all of the agencies use the following to calculate your score:

• Your Credit History - Have you had credit for years, or for just a short time?
• History of Payments - Do you have any payments later than 30 days?
• Your Credit Card Balances - How many accounts do you hold, and how much do you owe on them?
• Credit Inquiries - How many times have you had your credit checked for a loan?

Each of these factors is assigned a value and a weight. The results are added up and distilled into a single number. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Typical home buyers probably find their credit scores 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

What can you do to improve your FICO score? Unfortunately, not much. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you can and should appeal incorrect items on your credit report.)

Getting your FICO score

Before you can improve your score, you have to know your score and make sure that the reports from each credit reporting agency are correct. Fair Isaac, the corporation that offered the first FICO credit score, sells FICO scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three credit reporting agencies. They also provide helpful information and online 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 every year from the three major 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.

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.

Curious about your credit score? Give us a call: 2037296681.