About the FICO Credit Score

Since our world is so automated, you're probably not surprised to hear that your ability to repay your mortgage loan boils down to a single number. This score is compiled by credit reporting agencies. They use the payment history from your various loans: credit cards, mortgages, car/boat loans etcetera.

Experian, TransUnion, and Equifax, the three major credit agencies, each have their own proprietary formula for building your credit score. The original FICO model 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 building your credit score:

• 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 do you have, and 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 varies slightly by agency. Credit scores range from 300 to 800. Higher scores are better. Most folks who want to get a mortgage in the current environment have a score above 620.

Not just for qualifying

Did you know? Credit 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 raise my FICO score?

How can you raise your credit score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should remove any incorrect data from your credit report; this is the only way to quickly improve your credit score.

How do I find out my credit score?

To raise your score, you've got to have the credit reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the corporation that invented the first FICO credit score, sells credit scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score along with credit reports from all three reporting agencies. Also available are helpful information and tools that help you improve your FICO score.

You can get a federally-mandated free credit report once per year from all three 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 right mortgage for you.

Curious about your credit score? Call us: 4357556622.