You Credit Score- How's Your FICO?

Since we live in an automated society, it should come as no surprise that your ability to repay your mortgage loan boils down to a single number. The FICO score is built by credit agencies. They use the payment history of your various loans: mortgages, car loans, credit cards, etcetera.

The three agencies use slightly different formulas to build a credit score. The original FICO score was developed by Fair Isaac and Company. 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, the differences aren't huge; each agency uses the following factors in building a credit score:

  • Your Credit History - Have you had credit for years, or for a short time?
  • Payment History - Do you have a history of late payments?
  • Credit Card Balances - How many credit card accounts do you hold, and how much do you owe on them?
  • Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of lending you money?

These factors are weighted differently depending on the formula being used. The result is a single number: your FICO score. FICO scores range from 300 to 800. Higher is better. Most people who want to get a mortgage loan in the current environment score 620 or above.

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

Can I improve my FICO score?

What can you do about your FICO score? Unfortunately, not much. Because the score is entirely based on your lifelong credit history, it is hard to significantly improve the score with quick fixes. You must, of course, appeal for the credit agency to remove any incorrect reporting on your credit report; this is the only "quick fix" for credit problems.

How do I find out my FICO score?

In order to improve your score, you've got to obtain the reports that are used to build it. Of course, you need the score as well. Fair Isaac, the corporation that offered the first FICO credit score, offers scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score along with credit reports from all three agencies. Also available are information and online tools that can help you understand how to improve your credit score.

You can get a federally-mandated free credit report every year from the three major credit reporting agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast and inexpensive.

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.

Curious about your FICO score? Call us at 978-422-2311.

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