You Credit Score- How's Your FICO?

Because we live in an automated, it's probably not that surprising that your creditworthiness boils down to a single number. The FICO score is built by credit reporting agencies. They use the payment history from all of your loans: mortgages, car/motorcycle loans, credit cards, etcetera.

All three major 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 these methods vary, the differences aren't huge; all of the agencies use the following factors in calculating your credit score:

  • Your Credit History - Have you had credit for many years, or for a short time?
  • Late Payments - Have you paid more than 30 days late?
  • Credit Card Balances - How many accounts do you hold? How much do you owe on your accounts?
  • Credit Inquiries - How many times have you had your credit checked for a loan?

These factors are assigned weights based on the formula being used. The result is a single number: your credit score. Credit scores can be as low as 300 and as high as 800. Higher is better. Most home buyers probably find their credit scores falling above 620.

Not just for qualifying

Did you know? Credit 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.

Raising your FICO score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Since the credit score is based on a lifetime of credit history, it's hard to change it quickly. You must appeal for the credit agency to remove any incorrect reporting from your credit report, which is the only way to quickly improve your credit score.

How do I find out my credit score?

Before you can improve your score, you have to get your score and make sure that the reports from each credit reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive, fast, and easy to get your credit score along with reports from all three agencies. They also provide 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 at AnnualCreditReport.com. These reports do not include a free score, but it's very inexpensive to get one at the same time.

Armed with this information, you'll 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 at 3103737406.

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