FICO - Your Credit Score

Since we live in a computer-driven world, you're probably not surprised to hear that your creditworthiness comes down to one number. Credit reporting agencies use your history of paying loans in order to create your FICO score.

Experian, TransUnion, and Equifax, the three major credit reporting agencies, each have their own proprietary formula for building your credit score. The original FICO 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, all of the agencies use the following to determine a credit score:

  • Your Credit History - How long have you had credit?
  • Payment History - Do you pay your bills on time?
  • Balances on your Credit Cards - How many credit card accounts do you have, and how much do you owe?
  • Credit Inquiries - How many times have lenders pulled your credit for the purpose of giving you a loan?

Each of these factors is assigned a value and a weight. The results are added up and distilled into a single number. FICO scores range from 300 to 800. Higher is always better. Typical home buyers will probably find their scores falling above 620.

Your score greatly affects your interest rate

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 probably a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

How can you improve your credit score? Because the credit score is entirely based on your lifelong credit history, it's difficult to change it quickly. You must, of course, appeal for the credit agency to remove any incorrect data from your credit report, which is the only way to quickly improve your credit score.

Know your FICO score

In order to raise your credit score, you've got to have the reports that are used to build it, and of course, you need the score itself. Fair Isaac, the company that offered the original FICO credit score, offers scores on myFICO.com. For a reasonable fee, you can get your FICO from all three reporting agencies, along with your credit report. Also available are helpful 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 all three agencies at 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.

Want to know more about your credit score? Call us: 866-840-8745 x2.