How's your FICO Score?

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Since we live in an automated world, it should come as no surprise that your ability to repay your mortgage loan comes down to just one number. The FICO score is built by credit agencies. They use the payment history of your various loans: mortgages, car loans, credit cards, and others.

The three reporting 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, all of the agencies use the following to calculate a score:

  • Your Credit History - How long have you had credit?
  • Payment History - Do you have a history of late payments?
  • Credit Card Balances - How many accounts do you have? How much do you owe?
  • Requests for Credit - How many times have you had your credit checked for a loan?

These factors are weighted a little bit differently depending on the formula being used. The result is one number. Credit scores range from 300 to 800. Higher scores are better. Most people getting a mortgage loan in the current environment have a score above 620.

FICO makes a big difference in your interest rate

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Lenders give lower interest rates to individuals with higher scores.

Can I improve my FICO score?

Is it possible to improve your FICO score? Since the score is entirely based on a lifetime of credit history, it is hard to change it quickly. You should remove any incorrect reporting from your credit report, which is the only "quick fix" for credit problems.

How do I find out my credit score?

In order to raise your score, you must obtain 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 quickly get your FICO score from all three agencies, along with your credit report. Also available are helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once a 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 obtain the right mortgage for you.

Want to know more about your FICO score? Call us: (630) 534-5500.