Scoring your Credit - How's your FICO?

Since we live in an computer-driven society, it's not surprising that your ability to repay your mortgage boils down to a single number. Credit reporting agencies use your history of paying loans to compile your FICO score.

TransUnion, Equifax, and Experian, the three major credit reporting agencies, each have their own proprietary formula for building a 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 build a score:

• Your Credit History - How long have you had credit?
• Payment History - Do you have any payments later than 30 days?
• Balances on your Credit Cards - How many credit card accounts do you have, and how much do you owe?
• Requests for Credit - How many times have lenders pulled your credit for the purpose of giving you a loan?

These factors are assigned weights based 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 have a score above 620.

Not just for qualifying

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Since the FICO score is based on your lifelong credit history, it's difficult to make a significant change in the number with quick fixes. (Of course you must appeal incorrect items on your credit report.)

How do I find out my credit score?

Before you can improve your credit score, you must know your score and be sure that the reports from each agency are correct. Fair Isaac, the company that invented the original FICO score, offers FICO scores on its website: myFICO.com. It's inexpensive to quickly get your FICO 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 FICO score.

You can get a federally-mandated free credit report once a year from all three credit reporting agencies when you visit 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 will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Want to know more about your FICO score? Give us a call: (808) 935-0678.