About the FICO Credit Score

Because we live in a computer-driven world, it should come as no surprise that your ability to repay virtually any loan comes down to a single number. Credit reporting agencies use your history of paying loans to create this score.

Equifax, TransUnion, and Experian, the three major credit reporting agencies, each have their own proprietary formula for building 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 each of the models considers a range of data available in your credit report, each agency uses the following to calculate your credit score:

• Your Credit History - How long have you had credit?
• History of Payments - Do you pay your bills on time?
• Balances on your Credit Cards - How many accounts do you carry? How much do you owe on your accounts?
• Inquiries on Your Credit - How many times have you had your credit checked for a loan?

These factors are weighted slightly differently depending on the formula being used. The result is a single number: your credit score. FICO scores range from 300 to 800. Higher is better. Typical home buyers probably find their scores falling above 620.

Your FICO score affects your monthly payment

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

What can you do to improve your FICO score? Very little in the short term. 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 have incorrect items removed from your credit report.)

How do I find out my credit score?

In order to improve your credit score, you must get the reports that are used to build it. Of course, you need the score as well. Fair Isaac, the company that invented the original FICO credit score, sells credit scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score along with reports from all three credit reporting agencies. They also provide helpful 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 once a year from all three agencies when you visit AnnualCreditReport.com. While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.

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

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