FICO - Your Credit Score

Since our society is so automated, you're probably not surprised to hear that your creditworthiness boils down to one number. The years of paying your various bills: your mortgage, vehicle payments, and credit card bills are analyzed, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

All three credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a credit score. Fair Isaac and Cooriginally developed this score. . While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While each of the models considers a range of data available in your credit report, the differences aren't huge; they all use the following to build a credit score:

  • Your Credit History - How many years have you had credit?
  • History of Payments - Do you have any payments later than 30 days?
  • Balances on your Credit Cards - How many credit card accounts do you hold, and how much do you owe?
  • Requests for Credit - How many times have lenders pulled your credit report for the purpose of lending you money?

Each of these is assigned a value and a weight. Each formula produces a single number which varies slightly by agency. FICO scores range from 300 to 800. Higher scores are better. Most home buyers have a score above 620.

Credit scores make a huge difference in your interest rate

FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

Is it possible to improve your credit score? Since the FICO score is based on your lifelong credit history, it's very difficult to change it quickly. You must remove any incorrect data from your credit report, which is the only "quick fix" for credit problems.

How do I find out my credit score?

In order to improve your FICO score, you must have the credit 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 to get your FICO from all three agencies, along with your credit report. They also provide helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report once a year from the three major agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast and very inexpensive.

Armed with this information, 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 your FICO score? Call us: 305-967-7200.