FICO - Your Credit Score

Because our society is so computer-driven, you're probably not surprised to hear that your creditworthiness boils down to a single number. All the years you've been paying your various bills: your mortgage, car payments, and credit card bills can be analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Each of the three credit agencies has its own formula for building your 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 each of the models considers a range of data available in your credit report, the differences aren't huge; they all use the following factors to build a credit score:

• Your Credit History - How many years have you had credit?
• History of Payments - Do you have any payments later than 30 days?
• Balances on your Credit Cards - How many accounts do you hold? How much do you owe?
• Credit Inquiries - How many times have you had your credit checked for a loan?

These factors are weighted slightly differently depending on the formula being used. Each formula produces a single number which may vary a a little by agency. Credit scores can be as low as 300 and as high as 800. Higher is better. Typical home buyers likely find their credit scores between 620 and 800.

Credit scores make a huge difference in interest rates

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.

Raising your credit score

Is there any way to improve your FICO score? Because the FICO score is based on your lifelong credit history, it's hard to change it quickly. (Of course you can and should have incorrect items removed from your credit report.)

How do I find out my credit score?

Before you can improve your score, you must get your score and make sure that the credit reports from each agency are correct. Fair Isaac, the company that offered the original FICO credit score, offers scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three agencies. 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 federally-mandated free credit report every year from the three major 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.

Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.

Curious about credit scores? Call us: 4104614043.