You Credit Score: How's Your FICO?

Because we live in a computer-driven world, it's probably not that surprising that your creditworthiness boils down to one number. All the years you've been paying your various bills: your mortgage, car payments, and credit card bills are analyzed, sliced, diced, 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 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 these methods vary from one agency to another, the differences aren't huge; each agency uses the following to calculate your score:

  • Your Credit History - How long have you had credit?
  • Payment History - Do you have any payments later than 30 days?
  • Your Credit Card Balances - How many accounts do you have, and how much do you owe on them?
  • Requests for Credit - How many times have lenders pulled your credit report for the purpose of lending you money?

Each of these factors is assigned a value and a weight. The result is one number. Credit scores range from 300 to 800. Higher scores are better. Typical home buyers will likely find their credit scores falling between 620 and 800.

FICO makes a big difference in interest rates

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 improve my FICO score?

What can you do to raise your FICO score? Very little in the short term. Since the score is based on a lifetime of credit history, it's very hard to significantly improve the score with quick fixes. (Of course you must appeal incorrect items on your credit report and we have companies we work hand and hand with to help resolve many credit issues to raise your credit score.)

How do I find out my credit score?

To improve your FICO score, you must have the credit 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 to get your FICO score from all three agencies, along with your credit report. 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 free credit report once per year from the three major agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast and very inexpensive.

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

Curious about your credit score? Call us: (816) 525-8000 in Lees Summit, MO or (636) 435-2300 in St. Louis, MO.