About the FICO Credit Score
Because our world is so automated, it's probably not that surprising that your creditworthiness comes down to a single number.
The years of paying your various bills: your mortgage, vehicle payments, and credit card bills can be analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.
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 these methods vary, the differences aren't huge; all of the agencies use the following factors in calculating your credit score:
- Your Credit History - How many years have you had credit?
- Payment History - Do you pay your bills on time?
- Balances on your Credit Cards - How many accounts? How much do you owe?
- Requests for Credit - How many times have lenders pulled your credit report for the purpose of giving you a loan?
These factors are weighted differently depending on the formula being used. 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 better. Most home buyers will probably find their credit scores between 620 and 800.
Not just for qualifying
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. Because the FICO score is entirely based on your lifelong credit history, it's very difficult to make a significant change in the number with quick fixes. (Of course you can and should appeal incorrect items on your credit report.)
Getting your FICO score
Before you can improve your credit score, you have to obtain your score and ensure that the reports from each agency are correct. Fair Isaac, the corporation that offered the original FICO credit score, offers credit scores on its website: myFICO.com. For a reasonable fee, you can quickly get your FICO from all three agencies, along with your credit report. They also provide helpful information and online tools that can help you improve your credit score.
You can get a free credit report once per year from the three major agencies by visiting AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.
Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to get the right mortgage for you.
Want to know more about your FICO score? Give us a call at 3103737406.