How's your FICO Score?
Since we live in a computer-driven world, it should come as no surprise that your ability to repay virtually any loan comes down to one number.
This score is compiled by credit reporting agencies. These agencies use the payment history of all of your loans: credit cards, mortgages, car loans and the like.
Each of the three credit agencies has its own formula for building your credit 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 these methods vary from one agency to another, the differences aren't huge; they all use the following factors in calculating a credit score:
- Credit History - How long have you had credit?
- Late Payments - Do you pay your bills on time?
- 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?
These factors are assigned weights based on the formula being used. The result is one number. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most home buyers in the current environment have a score above 620.
Your score greatly affects your monthly payment
FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are 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 appeal incorrect items on your credit report.)
How do I find out my credit score?
In order to raise your FICO score, you must obtain 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 its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score along with credit reports from all three agencies. Also available are information and online tools that 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 the three major credit reporting agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is quick and inexpensive.
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.
Want to know more about your FICO score? Give us a call: (813) 200-7931.