You Credit Score: How's Your FICO?
Since we live in a computer-driven world, it's probably not that surprising that your creditworthiness comes down to a single number.
Credit reporting agencies use your history of paying loans to compile your FICO score.
The three credit reporting agencies use slightly different formulas to build 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 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 your score:
- Your Credit History - How long have you had credit?
- History of Payments - Do you have a history of late payments?
- Your Credit Card Balances - How many accounts do you have? How much do you owe?
- Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of lending you money?
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. FICO scores range from 300 to 800. Higher is always better. Most borrowers who want to get a mortgage loan in the current environment have a score above 620.
Your FICO score greatly affects your monthly payment
Credit scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.
Improving your score
What can you do to improve your FICO score? Unfortunately, not much. Because the FICO score is based on a lifetime of credit history, it's difficult to change it quickly. (Of course you can and should appeal incorrect items on your credit report.)
How do I find out my credit score?
Before you can improve your score, you have to know your score and ensure that the reports from each credit reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to quickly get your FICO score from all three agencies, along with your credit report. They also provide information and tools that can help you improve your credit score.
You can get a free credit report every year from all three credit reporting agencies when you visit 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 will be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.
Want to know more about your FICO score? Call us: 4104614043.