Scoring your Credit - How's your FICO?

Because our world is so computer-driven, you're probably not surprised to hear that your ability to repay virtually any loan comes down to a single number. The FICO score is compiled by credit reporting agencies. These agencies use the payment history of your various loans: mortgages, car/motorcycle loans, credit cards, etcetera.

Each of the three credit reporting agencies has its own formula for building your credit score. The original FICO score was developed by Fair Isaac and Company. 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 determine 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 credit card accounts do you hold, and how much do you owe on them?
  • Credit Inquiries - How many times have you had your credit checked for a loan?

These factors are weighted differently depending on the formula being used. Each formula produces a single number which may vary a a little by agency. Credit scores can be as low as 300 and as high as 800. Higher is better. Most people getting a mortgage loan these days score 620 or above.

Your FICO score greatly affects your monthly payment

FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

Is it possible to raise your credit score? Since the FICO score is based on your lifelong credit history, it's very hard to make a significant change in the score with quick fixes. You should, of course, remove any incorrect reporting from your credit report; this is really the only "quick fix" for credit problems.

Know your FICO score

To raise your credit score, you've got to obtain the credit reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac, the company that offered the original FICO score, offers scores on myFICO.com. For a reasonable fee, you can get your FICO score from all three reporting agencies, along with your credit report. They also provide 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 when you visit 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 obtain the right mortgage for you.

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