You Credit Score- How's Your FICO?
Since we live in an automated society, it's not surprising that your ability to repay your mortgage loan boils down to a single number.
This score is built by credit reporting agencies. These agencies use the payment history of your various loans: credit cards, mortgages, car loans and the like.
The three agencies use slightly different formulas to build a credit score. Fair Isaac and Cooriginally developed this score. .
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 each of the models considers a range of data available in your credit report, all of the agencies use the following to build a score:
- Your Credit History - How many years have you had credit?
- History of Payments - Do you have a history of late payments?
- Your Credit Card Balances - How many accounts? How much do you owe?
- Requests for 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. Each formula produces a single number which may vary slightly from one agency to another. FICO scores range from 300 to 800. Higher is always better. Most home buyers have a score above 620.
FICO makes a difference in interest rates
Did you know? 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.
Improving your score
Is there any way to improve your credit score? Despite what you hear from "credit repair" companies, the score is formulated from your lifelong credit history, so you can't turn it around right away. (Of course you must appeal incorrect items on your credit report.)
How do I find out my credit score?
In order to improve your FICO score, you must obtain the reports that are used to build it, and of course, you need the score itself. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to get your FICO from all three reporting agencies, along with your credit report. Also available are information and tools that help you analyze what actions might have the greatest impact on your FICO score.
You can get a federally-mandated free credit report once a year from the three major 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 your credit score? Give us a call at (813) 200-7931.