About the FICO Credit Score

Since we live in an computer-driven society, it's not surprising that your ability to repay your mortgage boils down to a single number. Credit reporting agencies use your history of paying all types of loans in order to build your FICO score.

Each of the three credit reporting agencies has its own formula for building your 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, all of the agencies use the following to calculate your credit score:

  • Credit History - Have you had credit for years, or for just a short time?
  • Payment History - Do you have any payments later than 30 days?
  • Your Credit Card Balances - How many accounts do you have, and how much do you owe?
  • Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of lending you money?

These factors are weighted a little bit differently depending on which formula the agency uses. The result is one number. Credit scores can be as low as 300 and as high as 800. Higher is always better. Typical home buyers likely find their credit scores falling between 620 and 800.

Credit scores make a big 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.

Can I improve my FICO 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 must, of course, appeal for the credit agency to remove any incorrect reporting on your credit report, which is the only way to quickly improve your credit score.

Know your FICO score

To raise your credit score, you must obtain the reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the corporation that invented the first FICO score, offers credit scores on myFICO.com. For a reasonable fee, you can get your FICO from all three agencies, along with your credit report. They also provide information and online tools that help you improve your credit score.

You can get a federally-mandated free credit report once per year from all three credit reporting agencies by visiting AnnualCreditReport.com. These reports do not include a free 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 obtain the right mortgage for you.

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

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