FICO - Your Credit Score
Since we live in an automated society, it's not surprising that your ability to repay your mortgage loan comes down to a single number.
All the years you've been paying your various bills: your mortgage, vehicle 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 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 these methods vary from one agency to another, the differences aren't huge; all of the agencies use the following to calculate a credit score:
- Credit History - Have you had credit for many years, or for a short time?
- Late Payments - Do you pay your bills on time?
- Balances on your Credit Cards - How many accounts? How much do you owe?
- Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of lending you money?
Each of these is assigned a value and a weight. The result is a single number: your FICO score. FICO scores range from 300 to 800. Higher is better. Most home buyers in the current environment have a score above 620.
Your score greatly affects your monthly payment
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 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. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You must, of course, appeal for the credit agency to remove any incorrect data on your credit report, which is the only "quick fix" for credit problems.
Know your FICO
Before you can improve your FICO score, you must obtain your score and make certain that the credit reports from each agency are correct. Fair Isaac, the corporation that offered the original FICO credit score, sells credit 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. Also available are helpful information and tools that help you improve your credit score.
You can get a free credit report every 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 will be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.
Curious about your credit score? Call us at 7068605514.