You Credit Score- How's Your FICO?

Since we live in a computer-driven society, it's probably not that surprising that your ability to repay virtually any loan boils down to one number. The FICO score is compiled by credit reporting agencies. They use the payment history of all of your loans: mortgages, car/motorcycle/boat loans, credit cards, etcetera.

All three major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. Fair Isaac and Cooriginally developed this score. . While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While each of the models considers a range of data available in your credit report, the differences aren't huge; each agency uses the following to calculate a credit score:

• Credit History - Have you had credit for years, or for a short time?
• History of Payments - Do you have any payments later than 30 days?
• Balances on your Credit Cards - How many accounts? How much do you owe?
• 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 results are added up and distilled into a single number. FICO scores range from 300 to 800. Higher scores are better. Most people getting a mortgage these days score 620 or above.

Not just for qualifying

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 raise my FICO score?

Is it possible to improve your credit score? So called "credit repair" companies advertise quick fixes, but the FICO score is calculated from your lifetime credit history, so it's not possible to raise it significantly in the short term. (Of course you must appeal incorrect items on your credit report.)

How do I find out my credit score?

Before you can improve your credit score, you must get your score and make sure that the reports from each agency are correct. Fair Isaac, the company that offered the original FICO credit score, offers credit scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score along with reports from all three credit reporting agencies. 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 all three agencies when you visit AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.

Armed with this info, 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 credit score? Call us: 5122916100.