FICO - Your Credit Score
Since we live in an automated, you're probably not surprised to hear that your creditworthiness comes down to one number.
All the years you've been paying your various bills: your mortgage, car payments, and credit card bills can be analyzed, sliced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.
The three agencies use slightly different formulas to build a credit score. The original FICO score 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 the formulas vary from one agency to another, each agency uses the following to build a credit score:
- Credit History - How long have you had credit?
- History of Payments - Do you have any payments later than 30 days?
- Balances on your Credit Cards - How many credit card accounts do you hold, and how much do you owe?
- Requests for 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 home buyers likely find their scores above 620.
Not just for qualifying
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.
Raising your credit score
What can you do to raise your FICO score? Very little in the short term. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should, of course, remove any incorrect data on your credit report; this is the only way to quickly improve your credit score.
Getting your FICO score
To raise your FICO score, you've got to obtain the credit reports that are used to build it. Of course, you need the score as well. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to quickly get your FICO score from all three reporting agencies, along with your credit report. Also available are helpful information and online tools that can 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 credit reporting agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast and very 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 credit scores? Call us at 5416833300.