You Credit Score: How's Your FICO?
Since we live in an automated society, it's not surprising 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, vehicle payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.
All three major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at 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, all of the agencies use the following to determine a credit score:
- Credit History - How long have you had credit?
- Late Payments - Do you have a history of late payments?
- Your Credit Card Balances - How many accounts? How much do you owe?
- Credit Inquiries - How many times have you had your credit checked for a loan?
Each of these factors is assigned a value and a weight. Each formula produces a single number which may vary a a little from one agency to another. Credit scores can be as low as 300 and as high as 800. Higher is better. Most people who want to get a mortgage loan these days have a score above 620.
Your credit score greatly affects your interest rate
FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.
Can I improve my FICO score?
Is it possible to improve your FICO score? Since the score is entirely based on your lifelong credit history, it's very difficult to make a significant improvement in the number with quick fixes. You should, of course, remove any incorrect data from your credit report, which is the only way to quickly improve your credit score.
Getting your credit score
Before you can improve your credit score, you have to get your score and be sure that the credit reports from each agency are correct. 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 credit reporting agencies. They also provide helpful information and tools that can help you understand how to improve your FICO score.
You can get a free credit report once per year from the three major credit reporting 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 info, you'll 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: 3149139678.