FICO - Your Credit Score

Since we live in an computer-driven world, it's not surprising that your ability to repay your mortgage loan boils down to a single number. Credit reporting agencies use your history of paying loans to build this score.

Each of the three credit agencies has its own 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 each of the models considers a range of data available in your credit report, the differences aren't huge; each agency uses the following in calculating a credit score:

• Your Credit History - How many years have you had credit?
• Late Payments - Have you paid more than 30 days late?
• Balances on your Credit Cards - How many accounts do you have, and how much do you owe?
• Requests for Credit - How many times have you had your credit checked for a loan?

These factors are weighted differently depending on the formula being used. The results are added up and distilled into a single number. FICO scores range from 300 to 800. Higher is always better. Most home buyers probably find their FICO scores falling between 620 and 800.

Not just for qualifying

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.

Can I raise my credit score?

What can you do to improve your FICO score? Unfortunately, not much. Since the score is based on a lifetime of credit history, it's very hard to change it quickly. You must appeal for the credit agency to remove any incorrect data on your credit report, which is the only "quick fix" for credit troubles.

How do I find out my FICO score?

In order to improve your FICO score, you must have the credit 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 along with reports from all three reporting agencies. Also available are information and online tools that can help you understand how to improve your credit score.

You can get a federally-mandated free credit report every year from all three agencies by visiting 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 information, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Want to know more about credit scores? Call us: 8165258000.