About the FICO Credit Score

Because our world is so computer-driven, you're probably not surprised to hear that your creditworthiness comes down to one number. This score is compiled by credit agencies. These agencies use the payment history from your various loans: credit cards, mortgages, car/boat loans etcetera.

The three reporting agencies use slightly different formulas to build a credit 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; they all use the following to calculate a score:

• Your Credit History - How long have you had credit?
• Payment History - Do you pay your bills on time?
• Your Credit Card Balances - How many accounts do you carry? How much do you owe?
• Credit Inquiries - How many times have you had your credit checked for a loan?

These factors are assigned weights based on the formula being used. Each formula produces a single number which varies slightly from one agency to another. FICO scores range from 300 to 800. Higher is better. Most home buyers will probably find their credit scores between 620 and 800.

Your FICO score greatly affects how much you pay in interest every month

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.

Improving your score

Is it possible to improve your credit score? Because the credit score is entirely based on your lifelong credit history, it's very difficult to change it quickly. You should, of course, appeal for the credit agency to remove any incorrect reporting on your credit report; this is the only way to quickly improve your credit score.

Know your FICO score

Before you can improve your score, you have to get your score and be sure that the reports from each agency are correct. Fair Isaac, the company that invented the original FICO credit score, sells 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. They also provide information and tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report once a year from the three major agencies by visiting 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 get the most favorable mortgage.

Curious about credit scores? Call us at 9722920448.