About the FICO Credit Score
Since we live in an computer-driven society, it's not surprising that your ability to repay your mortgage loan boils down to just one number.
The FICO score is compiled by credit agencies. They use the payment history from all of your loans: credit cards, mortgages, car loans etcetera.
Each of the three credit agencies has its own 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, all of the agencies use the following to determine your credit score:
- Credit History - Have you had credit for years, or for just a short time?
- History of Payments - Do you have a history of late payments?
- Your Credit Card Balances - How many accounts do you hold? How much do you owe on your accounts?
- Requests for Credit - How many times have you had your credit checked for a loan?
Each of these is assigned a value and a weight. The results are added up and distilled into a single number. FICO scores range from 300 to 800. Higher is always better. Most people who want to get a mortgage score 620 or above.
Your FICO score affects how much you pay in interest every month
Did you know? Credit scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.
Improving your score
How can you raise your credit score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you can and should have incorrect items removed from your credit report.)
Know your FICO score
Before you can improve your FICO score, you have to know your score and make sure that the credit reports from each 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 analyze what actions might have the greatest impact on your FICO score.
You can get a free credit report once a year from all three credit reporting 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 info, you will be a more informed consumer and you'll be better positioned to get the right mortgage for you.
Want to know more about credit scores? Give us a call: 9043423622.