You Credit Score- How's Your FICO?

Since we live in an automated society, it should come as no surprise that your ability to repay your mortgage loan boils down to a single number. Credit reporting agencies use your history of paying loans in order to compile this score.

TransUnion, Equifax, and Experian, the three major credit reporting agencies, each have a proprietary formula for building your credit score. The original FICO score 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 the formulas vary from one agency to another, the differences aren't huge; each agency uses the following factors in calculating your credit 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? How much do you owe on your accounts?
  • Inquiries on Your Credit - How many times have lenders pulled your credit report for the purpose of lending you money?

Each of these factors is assigned a value and a weight. The result is one number. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most home buyers likely find their credit scores falling between 620 and 800.

Not just for qualifying

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.

Improving your score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. So called "credit repair" companies advertise quick fixes, but the FICO score is based on your lifelong credit history, so you can't turn it around right away. You should appeal for the credit agency to remove any incorrect reporting from your credit report; this is really the only way to quickly improve your credit score.

How do I find out my credit score?

In order to raise your score, you must have the reports that are used to build it. Of course, you need the score as well. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can quickly get your FICO score from all three agencies, along with your credit report. They also provide information and tools that help you improve your credit score.

You can get a free credit report once per year from the three major agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is fast and very inexpensive.

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

Curious about your FICO score? Call us: 435-755-6622.