About the FICO Credit Score
Because our world is so automated, it's probably not that surprising that your creditworthiness comes down to one number.
Credit reporting agencies use your payment history to build your FICO score.
All three credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. The original FICO was developed by Fair Isaac and Company.
While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While these methods vary, all of the agencies use the following to determine your credit score:
- Credit History - Have you had credit for years, or for just a short time?
- History of Payments - Do you have any payments later than 30 days?
- Balances on your Credit Cards - How many accounts do you hold? How much do you owe?
- Requests for Credit - How many times have lenders pulled your credit report for the purpose of giving you a loan?
These factors are assigned weights based on the formula being used. Each formula produces a single number which may vary a a little by agency. Credit scores can be as low as 300 and as high as 800. Higher is better. Most people getting a mortgage loan these days have a score above 620.
Credit scores make a difference in interest rates
Did you know? FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.
Raising your credit score
What can you do to improve your FICO score? Very little in the short term. So called "credit repair" companies advertise quick fixes, but the score is based on your lifelong credit history, so it's not possible to raise it significantly in the short term. You must, of course, appeal for the credit agency to remove any incorrect data from your credit report; this is the only way to quickly improve your credit score.
Getting your credit score
To raise your FICO score, you've got to get the reports that are used to build it. Of course, you need the score as well. Fair Isaac, the corporation that offered the original FICO score, sells FICO scores on its website: myFICO.com. For a reasonable fee, you can get your FICO score from all three agencies, along with your credit report. They also provide information and tools that help you improve your credit score.
You can get a free credit report once a year from the three major agencies by visiting AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.
Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.
Curious about your FICO score? Call us: 305-967-7200.