You Credit Score- How's Your FICO?

Since we live in an automated world, it should come as no surprise that your ability to repay your mortgage boils down to just one number. Credit reporting agencies use your loan payment history in order to compile this score.

All three 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. . 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 many years, or for just a short time?
• Payment History - Do you pay your bills on time?
• Balances on your Credit Cards - How many accounts do you have? How much do you owe on your accounts?
• Credit Inquiries - How many times have lenders pulled your credit for the purpose of lending you money?

Each of these factors is assigned a value and a weight. The results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher is better. Most home buyers in the current environment have a score above 620.

Your credit score affects how much you pay in interest every month

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

What can you do to improve your FICO score? Very little in the short term. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You must, of course, appeal for the credit agency to remove any incorrect data on your credit report; this is the only way to quickly improve your credit score.

How do I find out my credit score?

In order to raise your score, you've got to get the reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the company that offered the first FICO score, offers FICO scores on myFICO.com. It's inexpensive to get your FICO from all three reporting agencies, along with your credit report. They also provide helpful information and tools that 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. These reports do not include a free score, but it's very inexpensive to get one at the same time.

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

Curious about credit scores? Give us a call at 7202537070.