FICO - Your Credit Score

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Because our society is so computer-driven, you're probably not surprised to hear that your ability to repay your mortgage boils down to a single number. Credit reporting agencies use your history of paying loans to build this score.

The three agencies use slightly different formulas to build a credit score. The original FICO was developed by Fair Isaac and Company. 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 factors in calculating a credit score:

• Your Credit History - How many years have you had credit?
• Late Payments - Do you have a history of late payments?
• Balances on your Credit Cards - How many accounts? How much do you owe on your accounts?
• Credit Inquiries - How many times have lenders pulled your credit report for the purpose of lending you money?

These factors are assigned weights based on the formula being used. The results are added up and distilled into a single number. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Most folks getting a mortgage these days have a score above 620.

Your credit score greatly affects your interest rate

Did you know? 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.

Raising your FICO score

Is there any way to raise your credit score? So called "credit repair" companies advertise quick fixes, but the FICO score is formulated from your lifelong credit history, so you can't turn it around right away. (Of course you can and should appeal incorrect items on your credit report.)

Know your FICO score

Before you can improve your score, you have to get your score and make certain that the reports from each credit reporting agency are correct. Fair Isaac, the corporation that invented the original FICO score, offers credit scores on its website: myFICO.com. It's inexpensive to quickly get your FICO from all three agencies, along with your credit report. Also available are 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 once per year from the three major credit reporting agencies at 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 will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Curious about your FICO score? Call us: (301)-938-1655.