You Credit Score- How's Your FICO?

Because we live in a computer-driven world, it's probably not that surprising that your creditworthiness comes down to one number. The years of paying your various bills: your mortgage, vehicle payments, and credit card bills can be analyzed, sliced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

TransUnion, Equifax, and Experian, the three major credit agencies, each have a proprietary formula for building a credit score. The original FICO was developed by Fair Isaac and Company. 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 each of the models considers a range of data available in your credit report, all of the agencies use the following to determine your score:

  • Your Credit History - How long have you had credit?
  • Payment History - Do you pay your bills on time?
  • Credit Card Balances - How many credit card accounts do you hold, and how much do you owe?
  • Requests for Credit - How many times have lenders pulled your credit for the purpose of giving you a loan?

Each of these is assigned a value and a weight. The result is one number. Credit scores can be as low as 300 and as high as 800. Higher is always better. Most borrowers getting a mortgage loan have a score above 620.

Your FICO score greatly affects your interest rate

FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

Can I raise my FICO 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. (Of course you can and should remove incorrect data on your credit report.)

Know your FICO

To improve your FICO score, you must get the 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. For a reasonable fee, you can get your FICO score from all three agencies, along with your credit report. They also provide helpful information and tools that can help you understand how to improve your FICO score.

You can get a free credit report every year from the three major credit reporting agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is quick and inexpensive.

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

Curious about credit scores? Give us a call: (478) 746-2063.

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