You Credit Score- How's Your FICO?
Because we live in an automated, it should come as no surprise that your creditworthiness boils down to one number.
All the years you've been paying your various bills: your mortgage, car 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.
Experian, TransUnion, and Equifax, the three major credit agencies, each have a proprietary formula for building a credit score. Fair Isaac and Cooriginally developed this score. .
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 these methods vary, all of the agencies use the following to build a credit score:
- Credit History - How long have you had credit?
- Late Payments - Do you have a history of late payments?
- Credit Card Balances - How many accounts? How much do you owe?
- Credit Inquiries - 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 may vary a a little by agency. Credit scores range from 300 to 800. Higher is always better. Most home buyers will likely find their FICO scores falling between 620 and 800.
Your score affects how much you pay in interest every month
Credit scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.
Can I improve my FICO score?
Is there any way to raise your FICO score? So called "credit repair" companies advertise quick fixes, but the score is based on your lifelong credit history, so you can't turn it around right away. (Of course you can and should have incorrect items removed from your credit report.)
Getting your credit score
To improve 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 (www.myFICO.com) that lets you do just that. For a reasonable fee, you can get your FICO score from all three agencies, along with your credit report. They also provide information and tools that can help you understand how to improve your FICO score.
You can get a federally-mandated free credit report once per year from the three major credit reporting agencies by visiting AnnualCreditReport.com. While this report does not include a free credit score, the cost to "upgrade" your report to include a credit score is very reasonable.
Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to get the right mortgage for you.
Curious about your credit score? Call us at (800) 288-9693.