FICO - Your Credit Score

Since we live in a computer-driven world, it should come as no surprise that your ability to repay virtually any loan boils down to one number. Credit reporting agencies use your loan payment history to create your FICO score.

Each of the three credit agencies has its own formula for building your credit score. Fair Isaac and Cooriginally developed this score. . 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, all of the agencies use the following to determine a score:

  • Your Credit History - How many years have you had credit?
  • Payment History - Do you pay your bills on time?
  • Credit Card Balances - How many accounts do you hold? How much do you owe on your accounts?
  • Requests for Credit - How many times have lenders pulled your credit report for the purpose of lending you money?

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 is always better. Most home buyers will probably find their credit scores falling above 620.

Not just for qualifying

FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Raising your FICO score

What can you do to raise your FICO score? Unfortunately, not much. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should remove any incorrect data on your credit report, which is the only way to quickly improve your credit score.

Know your FICO

To improve your score, you've got to have the reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the company that offered the original FICO score, sells scores on myFICO.com. It's inexpensive to get your FICO from all three agencies, along with your credit report. Also available are information and online tools that help you understand how to improve your FICO score.

You can get a free credit report once per year from all three credit reporting agencies at AnnualCreditReport.com. These reports do not include a free credit 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 right mortgage for you.

Want to know more about your credit score? Give us a call: 706-860-5514.

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