Scoring your Credit - How's your FICO?

Since we live in an computer-driven 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 to compile your FICO score.

Each of the three credit agencies has its own formula for building your credit score. The original FICO model was developed by Fair Isaac and Company. 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; all of the agencies use the following factors in calculating your credit score:

  • 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 credit card accounts do you hold, and how much do you owe on them?
  • Inquiries on Your Credit - How many times have you had your credit checked for a loan?

Each of these is assigned a value and a weight. The result is one number. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most home buyers these days have a score above 620.

Credit scores make a 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 probably a better credit risk, and thus may qualify for a better mortgage rate.

Can I raise my FICO score?

Is it possible to raise your credit score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you can and should have incorrect items removed from your credit report.)

How do I find out my FICO score?

To improve your score, you've got to get the reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac, the company that offered the first FICO credit score, offers credit scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three credit reporting agencies. Also available are 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 per year from all three credit reporting agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is fast and inexpensive.

Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.

Want to know more about your credit score? Call us: 954.920.9799.

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