FICO - Your Credit Score

Because we live in a computer-driven society, it should come as no surprise that your creditworthiness boils down to a single number. Credit reporting agencies use your history of paying loans to compile this score.

Each of the three credit agencies has its own formula for building your credit 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; each agency uses the following factors in building your score:

• Credit History - How many years have you had credit?
• Late Payments - Do you have a history of late payments?
• Balances on your Credit Cards - How many accounts? How much do you owe on your accounts?
• Requests for Credit - How many times have you had your credit checked for a loan?

These factors are weighted slightly differently depending on which formula the agency uses. The result is one number. FICO scores can be as low as 300 and as high as 800. Higher scores are better. Most home buyers will probably find their FICO scores falling between 620 and 800.

Your credit score affects how much you pay in interest every month

FICO 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.

Can I raise my credit score?

Is it possible to raise your FICO score? Because the credit score is entirely based on a lifetime of credit history, it's very hard to significantly improve the number with quick fixes. (Of course you can and should have incorrect items removed from your credit report.)

How do I find out my FICO score?

Before you can improve your score, you must get your score and make certain that the credit reports from each reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to get your FICO from all three agencies, along with your credit report. Also available are helpful information and online tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report once per year from all three agencies at 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 information, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Curious about credit scores? Call us: 3103737406.