FICO - Your Credit Score

Because we live in a computer-driven society, it's probably not that surprising that your creditworthiness comes down to one number. This score is built by credit reporting agencies. These agencies use the payment history of all of your loans: mortgages, car loans, credit cards, etcetera.

All three major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a credit score. The original FICO was developed by Fair Isaac and Company. While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While the formulas vary, all of the agencies use the following to determine your score:

• Credit History - Have you had credit for years, or for just 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, and how much do you owe?
• Credit Inquiries - How many times have you had your credit checked for a loan?

These factors are weighted differently depending on the formula being used. The results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher scores are better. Most home buyers these days have a score above 620.

Not just for qualifying

Did you know? FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

Is it possible to improve your credit score? So called "credit repair" companies advertise quick fixes, but the score is built on your lifetime credit history, so you can't turn it around right away. You should, of course, appeal for the credit agency to remove any incorrect data on your credit report; this is the only way to quickly improve your credit score.

Getting your credit score

In order to improve your FICO score, you've got to 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 score, sells credit scores on its website: 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 information and tools that can help you understand how to improve your credit score.

You can get a federally-mandated free credit report every 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.

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

Curious about credit scores? Call us at 720-598-8300.