About the FICO Credit Score

Since we live in an computer-driven society, it should come as no surprise that your ability to repay your mortgage boils down to a single number. All the years you've been paying your various bills: your mortgage, car payments, and credit card bills are analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

TransUnion, Equifax, and Experian, the three major credit agencies, each have a proprietary formula for building your credit score. Fair Isaac and Cooriginally developed this score. . 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 these methods vary from one agency to another, the differences aren't huge; all of the agencies use the following factors in calculating your score:

• Your Credit History - Have you had credit for years, or for a short time?
• History of Payments - Do you pay your bills on time?
• Your Credit Card Balances - How many accounts do you have? How much do you owe on your accounts?
• Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of lending you money?

These factors are weighted a little bit differently depending on the formula being used. The results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher is always better. Most borrowers getting a mortgage loan have a score above 620.

Credit scores make a difference in your interest rate

Did you know? Credit scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.

Can I raise my credit score?

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Despite what you hear from "credit repair" companies, the score is calculated from your lifetime credit history, so you can't turn it around right away. You should appeal for the credit agency to remove any incorrect data from your credit report; this is really the only way to quickly improve your credit score.

Getting your FICO score

In order to improve your FICO score, you must have the reports that the agencies use 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 as well as credit reports from all three credit reporting agencies. Also available are information and 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. These reports do not include a free score, but it's very inexpensive to get one at the same time.

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 credit scores? Call us: 2817780805.