You Credit Score- How's Your FICO?

Since our world is so computer-driven, it should come as no surprise that your ability to repay your mortgage comes down to one number. This score is built by credit agencies. These agencies use the payment history of all of your loans: mortgages, car/motorcycle loans, credit cards, etcetera.

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, all of the agencies use the following to calculate a credit score:

  • Credit History - Have you had credit for years, or for a short time?
  • Payment History - Do you have any payments later than 30 days?
  • Balances on your Credit Cards - How many accounts do you carry? How much do you owe?
  • Requests for Credit - How many times have lenders pulled your credit report for the purpose of lending you money?

These factors are weighted differently depending on the formula being used. The result is a single number: your FICO score. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Most folks getting a mortgage loan these days have a score above 620.

Credit scores make a big difference in your interest rate

Did you know? 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.

Improving your score

What can you do to improve your FICO score? Very little in the short term. So called "credit repair" companies advertise quick fixes, but the score is calculated from your lifelong credit history, so you can't turn it around right away. You must appeal for the credit agency to remove any incorrect data from your credit report, which is the only way to quickly improve your credit score.

Getting your credit score

To raise your score, you've got to get the credit reports that are used to build it, and of course, you need the score itself. Fair Isaac, the company that offered the first FICO credit score, sells scores on its website: myFICO.com. It's inexpensive to get your FICO score from all three agencies, along with your credit report. They also provide information and tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report every year from all three 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 will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Curious about credit scores? Give us a call: 7068605514.

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Augusta Mortgage Solutions

NMLS#:148529 GA Residential Mortgage Licensee #18861

141 North Belair Road Suite 102 NMLS# 149807
Evans, GA 30809-7431