How's your FICO Score?
Because we live in an automated, you're probably not surprised to hear that your creditworthiness boils down to a single number.
The FICO score is compiled by credit agencies. These agencies use the payment history of your various loans: credit cards, mortgages, car loans and the like.
The three agencies use slightly different formulas to build a credit 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 determine a credit score:
- Credit History - How many years have you had credit?
- Payment History - Do you have a history of late payments?
- Balances on your Credit Cards - How many accounts? 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 assigned weights based on the formula being used. The result is a single number: your FICO score. FICO scores range from 300 to 800. Higher is always better. Most home buyers likely find their FICO scores between 620 and 800.
Credit scores make a big difference in interest rates
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.
Can I improve my credit score?
Is it possible to raise your FICO score? Since the credit score is based on your lifelong credit history, it is difficult to significantly improve the number with quick fixes. You should, of course, appeal for the credit agency to remove any incorrect data on your credit report; this is really the only way to quickly improve your credit score.
Getting your FICO score
Before you can improve your score, you must know your score and make certain that the credit reports from each credit reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three agencies. They also provide helpful information and tools that can 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 the three major agencies by visiting 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 get the right mortgage for you.
Want to know more about your FICO score? Call us: (303) 228-2254.