How's your FICO Score?

Since our world is so computer-driven, it's probably not that surprising that your creditworthiness boils down to a single number. This score is built by credit agencies. These agencies use the payment history of all of your loans: credit cards, mortgages, car/boat loans and the like.

Experian, TransUnion, and Equifax, the three major credit agencies, each have their own proprietary formula for building a credit score. Fair Isaac and Cooriginally developed this score. . 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 these methods vary from one agency to another, the differences aren't huge; all of the agencies use the following in calculating your score:

  • 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 credit card accounts do you hold, and how much do you owe?
  • Credit Inquiries - How many times have lenders pulled your credit report for the purpose of giving you a loan?

These factors are weighted differently depending on the formula being used. The result is one number. Credit scores range from 300 to 800. Higher is always better. Most home buyers probably find their scores falling above 620.

Credit scores make a difference in interest rates

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.

Can I raise my credit score?

What can you do to raise your FICO score? Very little in the short term. Because the FICO score is entirely based on your lifelong credit history, it is hard to make a significant change in the number with quick fixes. (Of course you can and should remove incorrect data on your credit report.)

Getting your FICO score

In order to improve your FICO score, you must get the credit reports that are used to build it. Of course, you need the score as well. Fair Isaac, the company that invented the original FICO credit score, sells FICO 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 information and tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report once a 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.

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 credit score? Give us a call: 435-755-6622.