About the FICO Credit Score

Since we live in an automated society, it's not surprising that your ability to repay your mortgage loan boils down to just one number. Credit reporting agencies use your loan payment history to compile a FICO score.

All three major credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at 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, the differences aren't huge; they all use the following in building a credit score:

• Your Credit History - How long have you had credit?
• History of Payments - Do you have a history of late payments?
• Credit Card Balances - How many accounts? How much do you owe on your accounts?
• Credit Inquiries - How many times have lenders pulled your credit for the purpose of giving you a loan?

Each of these is assigned a value and a weight. The results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher is better. Most home buyers these days have a score above 620.

Not just for qualifying

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.

Can I raise my FICO score?

Unfortunately, there isn't a lot you can do to immediately improve your credit score. So called "credit repair" companies advertise quick fixes, but the FICO score is formulated from your lifetime credit history, so it's not possible to raise it significantly in the short term. You should remove any incorrect data on your credit report, which is the only "quick fix" for credit problems.

Know your FICO score

Before you can improve your credit score, you have to obtain your score and be sure that the credit reports from each credit reporting agency are correct. 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 credit reports from all three reporting agencies. They also provide helpful information and online tools that can help you understand how to improve your FICO score.

You can get a federally-mandated free credit report once a year from all three agencies at 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.

Armed with this information, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Curious about your credit score? Call us at 2817780805.