About the FICO Credit Score

Since our society is so computer-driven, you're probably not surprised to hear that your ability to repay your mortgage loan comes 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, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Experian, TransUnion, and Equifax, 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. 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; all of the agencies use the following factors to build your score:

  • Your Credit History - How long have you had credit?
  • Payment History - Do you pay your bills on time?
  • Your Credit Card Balances - How many accounts do you hold? How much do you owe?
  • Credit Inquiries - How many times have lenders pulled your credit for the purpose of giving you a loan?

These factors are assigned weights based on the formula being used. The result is a single number: your FICO score. FICO scores can be as low as 300 and as high as 800. Higher scores are better. Most borrowers who want to get a mortgage in the current environment have a score above 620.

Credit scores make a difference in interest rates

Did you know? 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.

Improving your score

What can you do to raise your FICO score? Very little in the short term. So called "credit repair" companies advertise quick fixes, but the FICO score is calculated from your lifetime credit history, so you can't turn it around right away. (Of course you must remove incorrect data on your credit report.)

How do I find out my FICO score?

Before you can improve your credit score, you have to get your score and make sure that the reports from each reporting agency are correct. Fair Isaac, the company that offered the original FICO credit score, sells FICO scores on its website: myFICO.com. For a reasonable fee, you can get your FICO from all three agencies, along with your credit report. Also available are helpful information and tools that help you understand how to improve your FICO score.

You can get a free credit report once a year from all three credit reporting agencies at AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.

Armed with this info, you'll be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.

Curious about your FICO score? Call us at 8165258000.