About the FICO Credit Score
Because we live in an automated, it's probably not that surprising that your creditworthiness comes down to one number.
Credit reporting agencies use your payment history to build 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 these methods vary from one agency to another, each agency uses the following to determine a credit score:
- Credit History - How long have you had credit?
- Payment History - Have you paid more than 30 days late?
- Credit Card Balances - How many accounts do you have, and how much do you owe on them?
- Requests for Credit - How many times have lenders pulled your credit report for the purpose of lending you money?
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 will probably find their FICO scores falling between 620 and 800.
Credit scores make a difference in interest rates
FICO scores are used for more than just determining whether or not you qualify for a mortgage. 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 should, of course, remove any incorrect data on your credit report, which is the only "quick fix" for credit problems.
Know your FICO
Before you can improve your FICO score, you have to know your score and be sure that the reports from each reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to quickly get your FICO score from all three agencies, along with your credit report. Also available are information and tools that help you improve your FICO score.
You can get a federally-mandated free credit report once per year from all three credit reporting agencies at 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'll be a more informed consumer and you'll be better positioned to get the most favorable mortgage.
Curious about credit scores? Call us at (478) 746-2063.