How's your FICO Score?

Since we live in an computer-driven society, it's not surprising that your ability to repay your mortgage comes down to just one number. This score is compiled by credit agencies. These agencies use the payment history of your various loans: credit cards, mortgages, car loans and the like.

All three major credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a credit score. The original FICO model 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 these methods vary from one agency to another, each agency uses the following to build a score:

• Credit History - How long have you had credit?
• Late Payments - Have you paid more than 30 days late?
• Credit Card Balances - How many 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 slightly differently depending on which formula the agency uses. Each formula produces a single number which varies slightly by agency. Credit scores range from 300 to 800. Higher is always better. Most home buyers in the current environment have a score above 620.

Your score greatly affects your monthly payment

Credit scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.

Raising your credit score

Is it possible to raise 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 must have incorrect items removed from your credit report.)

Know your FICO

Before you can improve your score, you have to know your score and make sure that the reports from each reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive, fast, and easy to get your credit score along with reports from all three reporting agencies. Also available are helpful information and tools that help you understand how to improve your credit score.

You can get a federally-mandated free credit report once per 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 right mortgage for you.

Want to know more about your FICO score? Give us a call: 5416833300.