About the FICO Credit Score

Since we live in an computer-driven world, it's not surprising that your ability to repay your mortgage comes down to just one number. All the years you've been paying your various bills: your mortgage, car payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

The three reporting agencies use slightly different formulas to build 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, all of the agencies use the following to build a score:

  • Your Credit History - How many years have you had credit?
  • History of Payments - Do you pay your bills on time?
  • Balances on your Credit Cards - How many accounts do you have, and how much do you owe?
  • Credit Inquiries - How many times have lenders pulled your credit for the purpose of giving you a loan?

Each of these factors is assigned a value and a weight. The results are added up and distilled into a single number. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most borrowers getting a mortgage loan have a score above 620.

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

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.

Can I raise my FICO score?

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Despite what you hear from "credit repair" companies, the 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, remove any incorrect reporting on your credit report, which is the only way to quickly improve your credit score.

How do I find out my FICO score?

Before you can improve your credit score, you have to obtain your score and ensure that the credit reports from each reporting agency are correct. Fair Isaac, the corporation that invented the first FICO score, sells FICO scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score along with reports from all three credit reporting agencies. Also available are helpful information and tools that help you understand how to improve your FICO score.

You can get a free credit report once per year from all three 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 obtain the right mortgage for you.

Want to know more about credit scores? Call us at (808) 935-0678.

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