You Credit Score- How's Your FICO?

Since we live in an automated, 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, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

The three agencies use slightly different formulas to build a 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 these methods vary from one agency to another, the differences aren't huge; all of the agencies use the following to calculate a score:

• Your Credit History - How long have you had credit?
• History of Payments - Do you have a history of late payments?
• Balances on your Credit Cards - 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 giving you a loan?

These factors are weighted differently depending on the formula being used. Each formula produces a single number which may vary slightly by agency. Credit scores range from 300 to 800. Higher is better. Typical home buyers probably find their FICO scores 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 probably a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Because the credit score is entirely based on a lifetime of credit history, it is hard to significantly improve the score with quick fixes. You should, of course, 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.

Know your FICO score

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

You can get a federally-mandated free credit report every year from all three credit reporting agencies when you visit 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'll be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.

Curious about credit scores? Call us: 3149139678.