About the FICO Credit Score

Since we live in an automated, you're probably not surprised to hear that your ability to repay virtually any loan comes down to one number. This score is created by credit reporting agencies. They use the payment history from your various loans: mortgages, car/motorcycle/boat loans, credit cards, and others.

Equifax, TransUnion, and Experian, the three major credit agencies, each have a proprietary formula for building your credit score. The original FICO model was developed by Fair Isaac and Company. Experian uses this model and calls its score FICO. Equifax's model, based on FICO, is called BEACON, while TransUnion, which also uses a slightly modified FICO, calls its score EMPIRICA. While the formulas vary from one agency to another, each agency uses the following to calculate your credit score:

• Your Credit History - Have you had credit for many years, or for just a short time?
• Late Payments - Have you paid more than 30 days late?
• Your Credit Card Balances - How many accounts do you hold, and how much do you owe?
• Credit Inquiries - How many times have you had your credit checked for a loan?

These factors are weighted slightly differently depending on the formula being used. Each formula produces a single number which varies slightly from one agency to another. Credit scores range from 300 to 800. Higher is better. Most home buyers have a score above 620.

Your FICO score greatly affects your interest rate

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.

Raising your FICO score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Since the score is based on a lifetime of credit history, it is hard to significantly improve the score with quick fixes. You should, of course, appeal for the credit agency to remove any incorrect data from your credit report, which is the only "quick fix" for credit troubles.

Getting your FICO score

In order to improve your credit score, you must have the reports that are used to build it, and of course, you need the score itself. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive, fast, and easy to get your credit score along with reports from all three agencies. They also provide helpful information and tools that can help you improve your credit score.

You can get a free credit report once a year from the three major credit reporting agencies at 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 most favorable mortgage.

Want to know more about your FICO score? Call us: 7068605514.