FICO - Your Credit Score

Since we live in an computer-driven world, it should come as no surprise 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 compile this score.

The three agencies use slightly different formulas to build a 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 these methods vary, each agency uses the following to build a score:

• Your Credit History - Have you had credit for years, or for a short time?
• Payment History - Do you have a history of late payments?
• Balances on your Credit Cards - How many accounts? How much do you owe on your accounts?
• Requests for Credit - How many times have you had your credit checked for a loan?

Each of these factors is assigned a value and a weight. The result is a single number: your FICO score. FICO scores can be as low as 300 and as high as 800. Higher scores are better. Most people getting a mortgage loan these days have a score above 620.

Credit scores make a big difference in interest rates

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.

Can I improve my credit score?

What can you do to raise your FICO score? Unfortunately, not much. Because the score is entirely based on a lifetime of credit history, it is difficult to significantly improve the score with quick fixes. (Of course you can and should have incorrect items removed from your credit report.)

How do I find out my FICO score?

Before you can improve your credit score, you have to get your score and make certain that the reports from each reporting agency are correct. Fair Isaac, the corporation that invented the first FICO credit score, offers credit scores on its website: myFICO.com. For a reasonable fee, you can quickly get your FICO score from all three agencies, along with your credit report. Also available are information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once a year from the three major credit reporting agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast and inexpensive.

Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.

Want to know more about credit scores? Call us at 7068605514.