You Credit Score- How's Your FICO?

Since we live in a computer-driven world, it should come as no surprise that your creditworthiness boils down to a single number. The FICO score is built by credit agencies. They use the payment history of your various loans: credit cards, mortgages, car/boat loans etcetera.

Experian, TransUnion, and Equifax, the three major credit agencies, each have their own proprietary formula for building a credit score. The original FICO model 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, the differences aren't huge; all of the agencies use the following in calculating your credit score:

  • Your Credit History - How many years have you had credit?
  • History of Payments - Do you have any payments later than 30 days?
  • Balances on your Credit Cards - How many accounts do you carry? How much do you owe on your accounts?
  • 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 can be as low as 300 and as high as 800. Higher is always better. Most home buyers likely find their scores above 620.

Your score affects 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.

Raising your credit score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Since the FICO score is entirely based on a lifetime of credit history, it's very difficult to change it quickly. You must remove any incorrect reporting on your credit report, which is the only "quick fix" for credit problems.

How do I find out my credit score?

To raise your FICO score, you've got to have the credit reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to get your FICO from all three agencies, along with your credit report. They also provide information and tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report every year from the three major 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.

Armed with this info, 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 credit score? Call us: (281) 778-0805.

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