FICO - Your Credit Score

Because we live in an automated, you're probably not surprised to hear that your creditworthiness comes down to a single number. Credit reporting agencies use your history of paying loans in order to compile a FICO score.

The three reporting agencies use slightly different formulas to build a credit score. The original FICO 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, the differences aren't huge; each agency uses the following factors to build your credit score:

• Credit History - How many years have you had credit?
• Late Payments - Do you have any payments later than 30 days?
• Balances on your Credit Cards - How many credit card accounts do you hold, and how much do you owe on them?
• Requests for Credit - How many times have you had your credit checked for a loan?

These factors are assigned weights based on the formula being used. Each formula produces a single number which may vary a a little by agency. FICO scores range from 300 to 800. Higher scores are better. Most home buyers probably find their scores between 620 and 800.

FICO makes a huge difference in your interest rate

FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

Raising your credit score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Since the score is entirely based on your lifelong credit history, it is difficult to significantly improve the score with quick fixes. (Of course you can and should remove incorrect data on your credit report.)

How do I find out my FICO score?

Before you can improve your score, you must get your score and ensure 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. It's inexpensive, fast, and easy to get your credit score along with reports from all three reporting agencies. They also provide information and online 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 per year from the three major credit reporting agencies at 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.

Armed with this information, you'll be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.

Want to know more about your credit score? Give us a call at 4104614043.