How's your FICO Score?

Since we live in an computer-driven society, it's not surprising that your ability to repay your mortgage comes down to a single number. Credit reporting agencies use your history of paying all types of loans in order to create a FICO score.

Experian, TransUnion, and Equifax, the three major credit reporting agencies, each have a 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 each of the models considers a range of data available in your credit report, each agency uses the following to build your score:

• Your Credit History - How many years have you had credit?
• Late Payments - Have you paid more than 30 days late, and how often?
• Balances on your Credit Cards - How many accounts do you have, and how much do you owe on them?
• Credit Inquiries - How many times have lenders pulled your credit for the purpose of giving you a loan?

Each of these factors is assigned a value and a weight. Each formula produces a single number which varies slightly from one agency to another. FICO scores range from 300 to 800. Higher scores are better. Typical home buyers will likely find their scores falling above 620.

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.

Raising your credit score

How can you improve your credit score? Since the score is based on a lifetime of credit history, it is hard to make a significant improvement in the number with quick fixes. (Of course you can and should remove incorrect data on your credit report.)

Know your FICO

To improve your FICO score, you must get the reports that are used to build it, and of course, you need the score itself. Fair Isaac, the corporation that offered the original FICO score, sells FICO scores on its website: myFICO.com. It's inexpensive to get your FICO from all three reporting agencies, along with your credit report. Also available are helpful information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report every year from the three major credit reporting agencies by visiting 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.

Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.

Want to know more about credit scores? Give us a call: 3149139678.