Scoring your Credit - How's your FICO?

Since we live in an computer-driven world, it's not surprising that your ability to repay your mortgage boils down to a single number. The years of paying your various bills: your mortgage, vehicle payments, and credit card bills can be analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Each of the three credit agencies has its own formula for building your credit score. The original FICO was developed by Fair Isaac and Company. 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 each of the models considers a range of data available in your credit report, the differences aren't huge; all of the agencies use the following in building a 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 do you have? How much do you owe on your accounts?
  • Inquiries on Your Credit - How many times have you had your credit checked for a loan?

Each of these is assigned a value and a weight. Each formula produces a single number which varies slightly from one agency to another. FICO scores range from 300 to 800. Higher is better. Most home buyers these days have a score above 620.

Your credit score affects your monthly payment

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 probably a better credit risk, and thus may qualify for a better mortgage rate.

Can I improve my credit score?

What can you do about your FICO score? Very little in the short term. So called "credit repair" companies advertise quick fixes, but the score is based on your lifetime credit history, so you can't turn it around right away. (Of course you must appeal incorrect items on your credit report.)

Getting your credit score

In order to raise your score, you've got to get the reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac has created a web site ( that lets you do just that. It's inexpensive, fast, and easy to get your credit score along with credit reports from all three credit 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 all three agencies when you visit These reports do not include a free score, but it's very inexpensive to get one at the same time.

Armed with this info, you will be a more informed consumer and you'll be better positioned to get the right mortgage for you.

Want to know more about credit scores? Call us: 978-422-2311.

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