About the FICO Credit Score

Because our society is so computer-driven, it's probably not that surprising that your creditworthiness boils down to a single number. This score is compiled by credit agencies. They use the payment history of your various loans: credit cards, mortgages, car/boat loans etcetera.

All three credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a credit score. The original FICO was developed by Fair Isaac and Company. 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 these methods vary, each agency uses the following to build a credit score:

• Your Credit History - How many years have you had credit?
• Payment History - Have you paid more than 30 days late, and how often?
• Balances on your Credit Cards - How many credit card accounts do you have, and how much do you owe on them?
• Credit Inquiries - How many times have lenders pulled your credit for the purpose of giving you a loan?

These factors are assigned weights based 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 is better. Most borrowers who want to get a mortgage loan have a score above 620.

Your score affects 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.

Improving your score

Is there any way to improve your FICO score? Because the FICO score is based on your lifelong credit history, it's difficult to change it quickly. (Of course you can and should appeal incorrect items on your credit report.)

Getting your FICO score

Before you can improve your score, you have to know your score and make sure that the reports from each agency are correct. Fair Isaac, the company that offered the first FICO credit score, offers scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three reporting agencies. They also provide information and tools that help you improve your credit score.

You can get a federally-mandated free credit report once a year from all three 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 obtain the most favorable mortgage.

Want to know more about your credit score? Give us a call at 3032282254.