About the FICO Credit Score

Since we live in an automated, you're probably not surprised to hear that your ability to repay your mortgage comes down to a single number. Credit reporting agencies use your history of paying all types of loans to create this score.

The three reporting agencies use slightly different formulas to build 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, all of the agencies use the following to build your credit score:

  • Your Credit History - Have you had credit for many years, or for just a short time?
  • Late Payments - Have you paid more than 30 days late, and how often?
  • Your Credit Card Balances - How many accounts do you carry? How much do you owe on your accounts?
  • Inquiries on Your Credit - How many times have lenders pulled your credit report for the purpose of lending you money?

Each of these factors is assigned a value and a weight. Each formula produces a single number which varies slightly by agency. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most people getting a mortgage loan in the current environment have a score above 620.

Your score greatly affects your interest rate

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.

Improving your score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You must remove any incorrect reporting from your credit report; this is the only way to quickly improve your credit score.

Know your FICO

In order to raise your credit score, you must have the reports that are used 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. It's inexpensive to get your FICO score from all three reporting agencies, along with your credit report. Also available are information and online 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 per year from all three agencies when you visit 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.

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 at (281) 778-0805.

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