FICO - Your Credit Score

Since we live in an automated world, it's not surprising that your ability to repay your mortgage loan boils down to just one number. Credit reporting agencies use your loan payment history to create your FICO score.

All three major credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. The original FICO model was developed by Fair Isaac and Company. While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While these methods vary, the differences aren't huge; each agency uses the following factors in building a credit score:

• Credit History - Have you had credit for many years, or for just a short time?
• History of Payments - Do you have a history of late payments?
• Credit Card Balances - How many accounts do you have, and how much do you owe?
• Requests for Credit - How many times have lenders pulled your credit for the purpose of giving you a loan?

These factors are weighted differently depending on the formula being used. The result is a single number: your credit score. FICO scores can be as low as 300 and as high as 800. Higher scores are better. Most home buyers probably find their scores above 620.

FICO makes a difference in your interest rate

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.

Can I improve my credit score?

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

Getting your FICO score

Before you can improve your FICO score, you must get your score and be sure that the reports from each agency are correct. Fair Isaac, the corporation that invented the original FICO credit score, offers credit scores on its website: myFICO.com. It's inexpensive to quickly get your FICO from all three agencies, along with your credit report. Also available are information and online tools that can help you improve your credit score.

You can get a free credit report once a year from all three agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is fast and inexpensive.

Now that you have all the facts, 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 credit scores? Call us at 9043423622.