How's your FICO Score?

Because we live in a computer-driven society, you're probably not surprised to hear that your creditworthiness comes down to one number. Credit reporting agencies use your history of paying loans to compile this score.

The three credit 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 in building your credit score:

• Your Credit History - Have you had credit for many years, or for a short time?
• History of Payments - Have you paid more than 30 days late, and how often?
• Your Credit Card Balances - How many accounts do you have? How much do you owe on your accounts?
• Credit Inquiries - How many times have lenders pulled your credit report for the purpose of giving you a loan?

These factors are weighted differently depending on which formula the agency uses. The result is a single number: your FICO score. FICO scores range from 300 to 800. Higher scores are better. Most home buyers in the current environment have a score above 620.

Credit scores make a huge difference in your interest rate

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

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Since the FICO score is based on your lifelong credit history, it's difficult to make a significant improvement in the number with quick fixes. (Of course you must appeal incorrect items on your credit report.)

Getting your FICO score

In order to raise your FICO score, you must get the credit reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac, the company that offered the first FICO credit score, offers FICO scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three reporting agencies. They also provide helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report every year from the three major credit reporting 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.

Armed with this info, you will be a more informed consumer and you'll be better positioned to get the right mortgage for you.

Curious about your credit score? Call us: 866-300-1550.