FICO - Your Credit Score

Since our world is so automated, you're probably not surprised to hear that your ability to repay your mortgage boils down to a single number. Credit reporting agencies use your history of paying loans to compile this score.

All three credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. Fair Isaac and Cooriginally developed this score. . 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, the differences aren't huge; each agency uses the following in calculating a 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 you had your credit checked for a loan?

These factors are weighted a little bit differently depending on the formula being used. The result is a single number: your FICO score. FICO scores range from 300 to 800. Higher scores are better. Most home buyers these days have a score above 620.

Not just for qualifying

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

What can you do to raise your FICO score? Very little in the short term. Despite what you hear from "credit repair" companies, the FICO score is formulated from your lifelong credit history, so you can't turn it around right away. You must appeal for the credit agency to remove any incorrect reporting on your credit report; this is the only "quick fix" for credit problems.

How do I find out my credit score?

Before you can improve your credit score, you must obtain your score and make certain that the credit reports from each agency are correct. 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 reporting agencies, along with your credit report. They also provide helpful information and online tools that can help you improve your FICO score.

You can get a federally-mandated free credit report every year from the three major agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is quick 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.

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