Scoring your Credit - How's your FICO?

Since we live in an automated society, it's not surprising that your ability to repay your mortgage comes down to a single number. All the years you've been paying your various bills: your mortgage, car payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

All three credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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 the formulas vary, the differences aren't huge; all of the agencies use the following factors in building a credit score:

• Your Credit History - How long have you had credit?
• History of Payments - Do you have a history of late payments?
• Your Credit Card Balances - How many credit card accounts do you hold, and how much do you owe?
• Requests for Credit - How many times have lenders pulled your credit for the purpose of lending you money?

These factors are weighted differently depending on which formula the agency uses. The results are added up and distilled into a single number. Credit scores can be as low as 300 and as high as 800. Higher is always better. Most borrowers who want to get a mortgage score 620 or above.

Credit scores make a huge difference in your interest rate

Did you know? Credit scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.

Improving your score

What can you do about your FICO score? Unfortunately, not much. So called "credit repair" companies advertise quick fixes, but the score is calculated from your lifelong credit history, so you can't turn it around right away. You must remove any incorrect data on your credit report; this is really the only way to quickly improve your credit score.

Getting your FICO score

Before you can improve your score, you must obtain your score and make sure that the credit reports from each agency are correct. Fair Isaac, the company 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. Also available are information and online tools that can help you improve your credit score.

You can get a federally-mandated free credit report once a year from the three major credit reporting agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is quick and very inexpensive.

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

Curious about your FICO score? Give us a call: 9254610500.