You Credit Score- How's Your FICO?

Since our society is so automated, you're probably not surprised to hear that your creditworthiness comes down to one number. Credit reporting agencies use your loan payment history in order to build this score.

All three credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. Fair Isaac and Cooriginally developed this score. . Experian uses this model and calls its score FICO. Equifax's model, based on FICO, is called BEACON, while TransUnion, which also uses a slightly modified FICO, calls its score EMPIRICA. While each of the models considers a range of data available in your credit report, each agency uses the following to calculate your score:

  • Credit History - How long have you had credit?
  • Late Payments - Have you paid more than 30 days late, and how often?
  • Balances on your Credit Cards - How many accounts do you have? How much do you owe?
  • Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of lending you money?

These factors are weighted differently depending on which formula the agency uses. Each formula produces a single number which may vary a a little by agency. FICO scores range from 300 to 800. Higher is always better. Most home buyers in the current environment have a score above 620.

FICO makes a huge difference in interest rates

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 probably a better credit risk, and thus may qualify for a better mortgage rate.

Can I raise my FICO score?

What can you do to improve your FICO score? Unfortunately, not much. Since the score is based on a lifetime of credit history, it's very difficult to significantly improve the score with quick fixes. You should, of course, appeal for the credit agency to remove any incorrect reporting from your credit report; this is the only "quick fix" for credit troubles.

Getting your FICO score

To raise your score, you must 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 score, sells credit scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three reporting agencies. 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 a year from the three major agencies at 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.

Armed with this info, you will be a more informed consumer and you'll be better positioned to get the right mortgage for you.

Curious about your credit score? Give us a call at (972)466-2551.

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