Scoring your Credit - How's your FICO?

Since our world is so computer-driven, you're probably not surprised to hear that your creditworthiness boils down to one number. Credit reporting agencies use your payment history to compile this score.

Experian, TransUnion, and Equifax, the three major credit reporting agencies, each have a proprietary formula for building 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 determine your credit score:

  • Credit History - How many years have you had credit?
  • Payment History - Do you pay your bills on time?
  • Your Credit Card Balances - How many accounts do you carry? How much do you owe on your accounts?
  • Requests for Credit - How many times have you had your credit checked for a loan?

These factors are weighted slightly differently depending on the formula being used. The result is one number. FICO scores can be as low as 300 and as high as 800. Higher is better. Typical home buyers likely find their scores between 620 and 800.

FICO makes a big difference in interest rates

Credit scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Raising your credit score

What can you do about 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 appeal for the credit agency to remove any incorrect reporting on your credit report; this is really the only way to quickly improve your credit score.

How do I find out my FICO score?

In order to raise your score, you must get the reports that are used to build it, and of course, you need the score itself. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can quickly get your FICO from all three agencies, along with your credit report. They also provide helpful information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once per year from all three 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.

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

Want to know more about your FICO score? Call us at (904) 342-3622.

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