Scoring your Credit - How's your FICO?

Since our society is so computer-driven, it's probably not that surprising that your creditworthiness boils down to a single number. Credit reporting agencies use your history of paying loans in order to create this score.

Experian, TransUnion, and Equifax, the three major credit reporting agencies, each have a proprietary formula for building 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 each of the models considers a range of data available in your credit report, each agency uses the following to determine a credit score:

• Credit History - How many years have you had credit?
• Payment History - Have you paid more than 30 days late, and how often?
• Your Credit Card Balances - How many credit card accounts do you have, and how much do you owe on them?
• Requests for Credit - How many times have you had your credit checked for a loan?

These factors are assigned weights based on the formula being used. The results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher scores are better. Most folks getting a mortgage these days score 620 or above.

FICO makes a huge difference in interest rates

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 raise my FICO score?

What can you do to raise your FICO score? Very little in the short term. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You must, of course, appeal for the credit agency to remove any incorrect data from your credit report, which is the only way to quickly improve your credit score.

Getting your FICO score

To improve your credit score, you must have the credit reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac, the corporation that invented the first FICO score, offers FICO scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three credit reporting agencies. Also available are information and tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once per year from all three credit reporting agencies at AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.

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.

Want to know more about your FICO score? Give us a call: 3172889434.