You Credit Score- How's Your FICO?

Since our world is so automated, it's probably not that surprising that your ability to repay virtually any loan comes down to a single number. Credit reporting agencies use your loan payment history in order to create your FICO score.

The three credit reporting agencies use slightly different formulas to build a credit score. The original FICO model was developed by Fair Isaac and Company. 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, each agency uses the following to determine a score:

• Your Credit History - How long have you had credit?
• Payment History - 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 you had your credit checked for a loan?

These factors are weighted slightly differently depending on the formula being used. The result is a single number: your credit score. FICO scores range from 300 to 800. Higher is better. Typical home buyers will probably find their scores between 620 and 800.

Credit scores make a big difference in your interest rate

FICO scores affect more than your ability to get a loan. They also affect your interest rate. Lenders give lower interest rates to individuals with higher scores.

Improving your 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. (Of course you must remove incorrect data on your credit report.)

How do I find out my FICO score?

In order to improve your score, you must have the credit reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can get your FICO score from all three agencies, along with your credit report. Also available are helpful 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 every year from all three credit reporting agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast 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 credit scores? Call us: 9254610500.