About the FICO Credit Score

Since we live in an automated world, it should come as no surprise that your ability to repay your mortgage loan comes down to just one number. Credit reporting agencies use your payment history in order to compile this score.

The three credit reporting agencies use slightly different formulas to build a 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 each of the models considers a range of data available in your credit report, all of the agencies use the following to build a credit score:

  • Your Credit History - How many years have you had credit?
  • Late Payments - Do you pay your bills on time?
  • Balances on your Credit Cards - How many accounts do you hold, and how much do you owe on them?
  • Credit Inquiries - How many times have you had your credit checked for a loan?

Each of these is assigned a value and a weight. The results are added up and distilled into a single number. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most borrowers getting a mortgage these days score 620 or above.

Not just for qualifying

Did you know? 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.

Can I raise my FICO score?

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Because the credit score is based on a lifetime of credit history, it is hard to significantly improve the number with quick fixes. You must remove any incorrect reporting on your credit report, which is the only "quick fix" for credit problems.

Getting your credit score

Before you can improve your score, you must know your score and be sure that the credit reports from each credit reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can quickly get your FICO from all three agencies, along with your credit report. They also provide helpful information and online tools that can help you understand how to improve your credit score.

You can get a federally-mandated free credit report once per year from all three credit reporting agencies at 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'll be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Want to know more about credit scores? Call us: 866-584-4650.

Got a Question?

Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.

Your Information
Your Question