FICO - Your Credit Score
Since we live in a computer-driven society, it's probably not that surprising that your ability to repay virtually any loan comes down to a single number.
Credit reporting agencies use your history of paying loans in order to create this score.
All three major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a credit score. The original FICO score 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 the formulas vary from one agency to another, the differences aren't huge; each agency uses the following in building your score:
- Your Credit History - How many years have you had credit?
- Late Payments - Do you have any payments later than 30 days?
- Your Credit Card Balances - How many credit card accounts do you have, and how much do you owe?
- Inquiries on Your Credit - How many times have you had your credit checked for a loan?
These factors are weighted a little bit differently depending on which formula the agency uses. The results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher is always better. Most home buyers have a score above 620.
Not just for qualifying
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. Since the FICO score is based on a lifetime of credit history, it is difficult to significantly improve the score with quick fixes. You must, of course, remove any incorrect reporting on your credit report, which is the only way to quickly improve your credit score.
Know your FICO
In order to raise your score, you must get the reports that are used to build it. Of course, you need the score as well. Fair Isaac, the corporation that offered the first FICO score, sells FICO scores on its website: myFICO.com. It's inexpensive to get your FICO from all three reporting agencies, along with your credit report. Also available are information and tools that can help you analyze what actions might have the greatest impact on your FICO score.
You can get a free credit report once a year from all three credit reporting agencies by visiting AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.
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? Call us at 561-395-4264.