About the FICO Credit Score

Since we live in an computer-driven society, it should come as no surprise that your ability to repay your mortgage loan comes down to a single number. All the years you've been paying your various bills: your mortgage, vehicle payments, and credit card bills are analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

The three credit reporting agencies use slightly different formulas to build 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 from one agency to another, the differences aren't huge; each agency uses the following factors to calculate a credit score:

  • Credit History - Have you had credit for years, or for a short time?
  • History of Payments - Do you pay your bills on time?
  • Credit Card Balances - How many credit card accounts do you have, and how much do you owe?
  • Requests for Credit - How many times have you had your credit checked for a loan?

These factors are weighted slightly differently depending on the formula being used. The result is one number. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most home buyers in the current environment have a score above 620.

Credit scores make a big 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 improve my credit score?

What can you do about your FICO score? Unfortunately, not much. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you can and should remove incorrect data on your credit report.)

Getting your credit score

Before you can improve your score, you have to get your score and ensure that the reports from each credit reporting agency are correct. Fair Isaac, the company that invented the original FICO score, offers credit scores on myFICO.com. For a reasonable fee, you can quickly get your FICO from all three agencies, along with your credit report. They also provide helpful information and online tools that can help you improve your FICO score.

You can get a federally-mandated free credit report once a year from the three major 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.

Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Want to know more about your FICO score? Give us a call at (281) 778-0805.

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