FICO - Your Credit Score
Because our world is so automated, you're probably not surprised to hear that your creditworthiness comes down to one number.
Credit reporting agencies use your history of paying all types of loans to compile this score.
All three credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. The original FICO score was developed by Fair Isaac and Company.
While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While the formulas vary, all of the agencies use the following to calculate a credit score:
- Your Credit History - Have you had credit for many years, or for just a short time?
- Late Payments - Do you have any payments later than 30 days?
- Your Credit Card Balances - How many credit card accounts do you hold, and how much do you owe on them?
- Credit Inquiries - 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 range from 300 to 800. Higher scores are better. Most folks getting a mortgage score 620 or above.
FICO makes a huge difference in 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.
Can I improve my credit score?
How can you improve your FICO score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should, of course, appeal for the credit agency to remove any incorrect reporting from your credit report; this is really the only way to quickly improve your credit score.
Getting your credit score
In order to improve your credit score, you've got to get the reports that are used to build it. Of course, you need the score as well. Fair Isaac, the company that invented the first FICO score, sells scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three agencies. They also provide helpful information and tools that help you understand how to improve your FICO score.
You can get a free credit report once per year from the three major credit reporting agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is fast and inexpensive.
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.
Curious about credit scores? Call us: 561-395-4264.