You Credit Score: How's Your FICO?

Since we live in an computer-driven society, it should come as no surprise that your ability to repay your mortgage loan boils down to just one number. Credit reporting agencies use your loan payment history in order to build a FICO score.

TransUnion, Equifax, and Experian, the three major credit reporting agencies, each have their own proprietary formula for building your 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; each agency uses the following to build a credit score:

• Your Credit History - How long have you had credit?
• 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?
• Credit Inquiries - How many times have lenders pulled your credit report for the purpose of lending you money?

These factors are weighted slightly differently depending on which formula the agency uses. The results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher is always better. Most home buyers have a score above 620.

Not just for qualifying

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 FICO score

What can you do to raise 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 should, of course, appeal for the credit agency to remove any incorrect data on your credit report; this is the only "quick fix" for credit problems.

Know your FICO score

In order to raise your FICO score, you've got to obtain the reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac, the company that offered the original FICO credit score, offers FICO scores on myFICO.com. It's inexpensive to quickly get your FICO score from all three reporting agencies, along with your credit report. 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 free credit report every year from the three major agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast and very inexpensive.

Armed with this information, you will 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: 7184417000.