You Credit Score: How's Your FICO?

Since we live in an automated society, it's not surprising that your ability to repay your mortgage boils down to a single number. The years of paying your various bills: your mortgage, car payments, and credit card bills are analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Each of the three credit 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 from one agency to another, each agency uses the following to determine a credit score:

  • Credit History - Have you had credit for many years, or for just a short time?
  • Payment History - Do you have a history of late payments?
  • Balances on your Credit Cards - How many accounts do you carry? How much do you owe on your accounts?
  • Requests for Credit - How many times have lenders pulled your credit report for the purpose of lending you money?

These factors are weighted slightly 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 scores are better. Most home buyers in the current environment have a score above 620.

Not just for qualifying

Did you know? 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

What can you do to improve your FICO score? Unfortunately, not much. Because the score is based on a lifetime of credit history, it is difficult to significantly improve the score with quick fixes. (Of course you can and should appeal incorrect items on your credit report.)

Getting your FICO score

In order to improve your FICO score, you've got to have the credit reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the corporation that offered the first FICO score, sells credit scores on its website: myFICO.com. For a reasonable fee, you can quickly get your FICO score from all three agencies, along with your credit report. Also available are helpful information and tools that help you improve your credit score.

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

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

Want to know more about your credit score? Give us a call: (772) 252-6724.

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