How's your FICO Score?
Since our world is so automated, 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 all types of loans to compile your FICO score.
The three reporting agencies use slightly different formulas to build a credit score. The original FICO 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 each of the models considers a range of data available in your credit report, each agency uses the following to calculate your score:
- Your Credit History - Have you had credit for many years, or for just a short time?
- History of Payments - Have you paid more than 30 days late, and how often?
- Balances on your Credit Cards - How many credit card accounts do you hold, and how much do you owe on them?
- 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 by agency. Credit scores range from 300 to 800. Higher is better. Most folks who want to get a mortgage these days score 620 or above.
Not just for qualifying
Did you know? FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.
Can I raise my FICO score?
What can you do to raise your FICO score? Unfortunately, not much. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You must, of course, remove any incorrect reporting on your credit report, which is the only way to quickly improve your credit score.
How do I find out my FICO score?
Before you can improve your score, you have to know your score and make sure that the reports from each agency are correct. Fair Isaac, the company that invented the first FICO score, offers FICO 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. They also provide 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 per year from the three major credit reporting agencies when you visit 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 will be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.
Want to know more about credit scores? Call us: (512) 291-6100.