FICO - Your Credit Score

Since we live in a computer-driven society, it's probably not that surprising that your creditworthiness boils down to one number. Credit reporting agencies use your history of paying loans to create this score.

All three major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at 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, each agency uses the following to determine your score:

• Your Credit History - Have you had credit for years, or for just a short time?
• Payment History - Do you pay your bills on time?
• Credit Card Balances - How many credit card 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 may vary slightly from one agency to another. FICO scores can be as low as 300 and as high as 800. Higher scores are better. Most home buyers these days have a score above 620.

Not just for qualifying

Did you know? 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.

Raising your FICO score

How can you raise your credit score? Since the FICO score is based on a lifetime of credit history, it's very hard to change it quickly. (Of course you must appeal incorrect items on your credit report.)

How do I find out my credit score?

Before you can improve your credit score, you must obtain your score and make sure that the reports from each credit reporting agency are correct. Fair Isaac, the corporation that invented the first FICO score, sells credit scores on its website: myFICO.com. It's inexpensive to quickly get your FICO score from all three reporting agencies, along with your credit report. Also available are information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report once per year from the three major credit reporting agencies by visiting AnnualCreditReport.com. While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.

Now that you have all the facts, you'll 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 at 9094671090.