How's your FICO Score?
Since we live in an automated society, it should come as no surprise that your ability to repay your mortgage comes down to a single number.
All the years you've been paying your various bills: your mortgage, car payments, and credit card bills are analyzed, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.
All three credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at 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 these methods vary from one agency to another, the differences aren't huge; each agency uses the following factors to build a credit score:
- Your Credit History - Have you had credit for years, or for just a short time?
- Late Payments - Have you paid more than 30 days late?
- Balances on your Credit Cards - How many accounts? How much do you owe on your accounts?
- Inquiries on Your Credit - How many times have lenders pulled your credit report for the purpose of giving you a loan?
These factors are weighted differently depending on the formula being used. The result is a single number: your FICO score. Credit scores range from 300 to 800. Higher is always better. Most folks getting a mortgage loan have a score above 620.
Your credit score greatly affects how much you pay in interest every month
Did you know? 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.
Can I improve my FICO score?
Unfortunately, there isn't a lot you can do to immediately improve your credit score. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you must appeal incorrect items on your credit report.)
Getting your FICO score
In order to improve your credit score, you've got to obtain the reports that are used to build it, and of course, you need the score itself. Fair Isaac, the corporation that invented the first FICO credit score, sells credit scores on myFICO.com. It's inexpensive to quickly get your FICO from all three reporting agencies, along with your credit report. They also provide information and online tools that can help you improve your FICO score.
You can get a free credit report once per year from the three major agencies at AnnualCreditReport.com. These reports do not include a free score, but it's very inexpensive to get one at the same time.
Armed with this information, you'll be a more informed consumer and you'll be better positioned to obtain the most favorable mortgage.
Curious about your FICO score? Call us: 978-422-2311.