About the FICO Credit Score

Since our society is so automated, it should come as no surprise that your creditworthiness comes down to one number. Credit reporting agencies use your loan payment history in order to build your FICO score.

All three credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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, all of the agencies use the following to build your credit score:

• Your Credit History - How long have you had credit?
• History of Payments - Do you have a history of late payments?
• Balances on your Credit Cards - How many accounts do you have, and how much do you owe?
• 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. Each formula produces a single number which may vary a a little by agency. FICO scores range from 300 to 800. Higher is always better. Most home buyers these days have a score above 620.

Credit scores make a big difference in interest rates

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

What can you do to improve your FICO score? Unfortunately, not much. Since the credit score is based on a lifetime of credit history, it is difficult to make a significant improvement in the number with quick fixes. You should, of course, appeal for the credit agency to remove any incorrect reporting on your credit report, which is the only "quick fix" for credit troubles.

Know your FICO score

Before you can improve your score, you must know your score and be sure that the credit reports from each credit reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can quickly get your FICO score from all three reporting agencies, along with your credit report. Also available are helpful information and online tools that help you understand how to improve your credit score.

You can get a federally-mandated free credit report every year from all three agencies by visiting AnnualCreditReport.com. While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.

Armed with this info, you will be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.

Want to know more about credit scores? Call us: 3103737406.