About the FICO Credit Score

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Since we live in an automated world, it's not surprising that your ability to repay your mortgage boils down to a single number. Credit reporting agencies use your loan payment history to create this score.

All three credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a credit 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 the formulas vary, each agency uses the following to calculate a score:

  • Credit History - Have you had credit for years, or for just a short time?
  • Payment History - Do you have a history of late payments?
  • Credit Card Balances - How many credit card accounts do you hold, and how much do you owe on them?
  • Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of lending you money?

These factors are weighted differently depending on the formula being used. The result is a single number: your FICO score. Credit scores range from 300 to 800. Higher is better. Typical home buyers likely find their scores falling between 620 and 800.

Not just for qualifying

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.

Improving your score

How can you improve your FICO score? So called "credit repair" companies advertise quick fixes, but the FICO score is calculated from your lifelong credit history, so you can't turn it around right away. You should, of course, remove any incorrect data on your credit report; this is really the only way to quickly improve your credit score.

How do I find out my FICO score?

In order to raise your credit score, you've got to get the reports that are used to build it, and of course, you need the score itself. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can get your FICO score from all three agencies, along with your credit report. They also provide helpful information and tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once a year from the three major credit reporting agencies when you visit 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 credit scores? Call us: 602-647-2555.