You Credit Score- How's Your FICO?

Because we live in an automated, you're probably not surprised to hear that your ability to repay your mortgage boils down to one number. The years of paying your various bills: your mortgage, vehicle payments, and credit card bills are analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

TransUnion, Equifax, and Experian, the three major credit reporting agencies, each have their own proprietary formula for building 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 these methods vary from one agency to another, the differences aren't huge; all of the agencies use the following factors to build your score:

• Credit History - How long have you had credit?
• History of Payments - Do you have any payments later than 30 days?
• Credit Card Balances - How many accounts do you hold? How much do you owe on your accounts?
• Credit Inquiries - How many times have lenders pulled your credit for the purpose of giving you a loan?

Each of these factors is assigned a value and a weight. Each formula produces a single number which varies slightly by agency. FICO scores can be as low as 300 and as high as 800. Higher is always better. Most folks who want to get a mortgage in the current environment score 620 or above.

Credit scores make a huge difference in your interest rate

Did you know? Credit 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.

Raising your credit score

How can you raise your FICO score? Despite what you hear from "credit repair" companies, the score is calculated from your lifelong credit history, so you can't turn it around right away. (Of course you must have incorrect items removed from your credit report.)

How do I find out my credit score?

Before you can improve your score, you have to get 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. For a reasonable fee, you can quickly get your FICO from all three agencies, along with your credit report. 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 credit reporting agencies by visiting AnnualCreditReport.com. These reports do not include a free 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 obtain the most favorable mortgage.

Curious about your credit score? Give us a call at 866-300-1550.