You Credit Score- How's Your FICO?

Since we live in an computer-driven society, it should come as no surprise that your ability to repay your mortgage comes down to a single number. Credit reporting agencies use your payment history to create your FICO score.

Each of the three credit reporting agencies has its own formula for building your 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 these methods vary, each agency uses the following to build a credit score:

• Credit History - Have you had credit for many years, or for just a short time?
• History of Payments - Have you paid more than 30 days late, and how often?
• Balances on your Credit Cards - How many credit card accounts do you hold, and how much do you owe on them?
• Inquiries on Your Credit - 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 results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher scores are better. Most folks getting a mortgage loan these days score 620 or above.

Your FICO score affects your interest rate

Did you know? FICO 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.

Raising your credit score

What can you do to improve 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 remove any incorrect data on your credit report; this is really the only "quick fix" for credit problems.

Know your FICO score

To raise your FICO 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. It's inexpensive, fast, and easy to get your credit score along with reports from all three agencies. Also available are helpful information and online tools that help you understand how to improve your credit score.

You can get a federally-mandated free credit report every year from the three major credit reporting agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is quick and very inexpensive.

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

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