How's your FICO Score?

Since we live in an automated society, it should come as no surprise that your ability to repay your mortgage boils down to just one number. The years of paying your various bills: your mortgage, car payments, and credit card bills can be analyzed, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

The three reporting agencies use slightly different formulas to build a credit score. The original FICO 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, the differences aren't huge; all of the agencies use the following in building your credit score:

• Credit History - Have you had credit for years, or for just a short time?
• History of Payments - Do you have a history of late payments?
• Your Credit Card Balances - How many accounts do you carry? How much do you owe on your accounts?
• Inquiries on Your Credit - How many times have lenders pulled your credit report for the purpose of lending you money?

These factors are weighted differently depending on which formula the agency uses. Each formula produces a single number which may vary a a little by agency. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Most borrowers getting a mortgage in the current environment score 620 or above.

FICO makes a difference in interest rates

Did you know? FICO scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.

Improving your score

What can you do about your FICO score? Unfortunately, not much. Since the FICO score is based on your lifelong credit history, it is hard to change it quickly. (Of course you must remove incorrect data on your credit report.)

Know your FICO

Before you can improve your credit score, you have to get your score and make sure that the credit reports from each agency are correct. Fair Isaac, the company that offered the original FICO score, offers credit scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three reporting agencies. Also available are 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 the three major agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is quick and very inexpensive.

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: 2037296681.