You Credit Score- How's Your FICO?

Because we live in an automated, 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 create this score.

TransUnion, Equifax, and Experian, the three major credit agencies, each have a proprietary formula for building your credit score. Fair Isaac and Cooriginally developed this score. . While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "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:

  • Credit History - How many years have you had credit?
  • Payment History - Do you pay your bills on time?
  • Credit Card Balances - How many accounts do you have, and how much do you owe on them?
  • Inquiries on Your Credit - How many times have lenders pulled your credit report for the purpose of lending you money?

Each of these factors is assigned a value and a weight. 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 scores are better. Most home buyers probably find their FICO scores between 620 and 800.

Your FICO score greatly affects how much you pay in interest every month

Did you know? 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.

Improving your score

What can you do to improve your FICO score? Unfortunately, not much. Despite what you hear from "credit repair" companies, the FICO score is based on your lifelong credit history, so it's not possible to raise it significantly in the short term. You should, of course, appeal for the credit agency to remove any incorrect reporting from your credit report; this is really the only way to quickly improve your credit score.

Know your FICO

In order to raise your score, you've got to get the reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the corporation that invented the original FICO credit score, sells scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score along with credit reports from all three reporting agencies. They also provide information and online tools that help you improve your credit score.

You can get a free credit report once a year from the three major credit reporting agencies at 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 credit score? Call us at 954-375-7774.