You Credit Score- How's Your FICO?

Since we live in an automated world, it's not surprising that your ability to repay your mortgage comes down to just one number. The years of paying your various bills: your mortgage, car payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

All three credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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, the differences aren't huge; each agency uses the following in building your score:

• Credit History - Have you had credit for many years, or for a short time?
• Payment History - Do you pay your bills on time?
• 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 you had your credit checked for a loan?

Each of these is assigned a value and a weight. The results are added up and distilled into a single number. FICO scores can be as low as 300 and as high as 800. Higher scores are better. Most folks getting a mortgage have a score above 620.

FICO makes a big difference in interest rates

Credit 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. (Of course you must have incorrect items removed from your credit report.)

How do I find out my credit score?

In order to improve your score, you must have the credit reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the company that offered 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 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 all three agencies by visiting AnnualCreditReport.com. These reports do not include a free 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 obtain the right mortgage for you.

Want to know more about your FICO score? Call us: (800) 919-3276.