You Credit Score- How's Your FICO?
Since we live in an computer-driven society, it's not surprising that your ability to repay your mortgage loan boils down to a single number.
The years of paying your various bills: your mortgage, car payments, and credit card bills can be analyzed, sliced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.
The three reporting agencies use slightly different formulas to build 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, each agency uses the following to build a credit score:
- Credit History - How many years have you had credit?
- History of Payments - Have you paid more than 30 days late?
- Your Credit Card Balances - How many credit card accounts do you hold, and how much do you owe?
- Credit Inquiries - How many times have lenders pulled your credit report for the purpose of lending you money?
These factors are assigned weights based on the formula being used. Each formula produces a single number which may vary slightly by agency. Credit scores can be as low as 300 and as high as 800. Higher is better. Typical home buyers probably find their scores above 620.
Your FICO score affects how much you pay in interest every month
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 a better credit risk, and thus may qualify for a better mortgage rate.
Raising your credit score
Unfortunately, there isn't a lot you can do to immediately improve your credit score. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should remove any incorrect reporting from your credit report; this is really the only "quick fix" for credit problems.
How do I find out my FICO score?
In order to raise your credit score, you must obtain the credit reports that are used to build it. Of course, you need the score as well. Fair Isaac, the company that invented the original FICO credit score, offers scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three credit reporting agencies. They also provide information and tools that help you understand how to improve your credit score.
You can get a free credit report once per year from all three credit reporting agencies when you visit 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.
Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to get the right mortgage for you.
Curious about your FICO score? Call us: 305-967-7200.