How's your FICO Score?
Since we live in an automated world, it should come as no surprise that your ability to repay your mortgage boils down to a single number.
The FICO score is built by credit agencies. They use the payment history of all of your loans: mortgages, car/motorcycle loans, credit cards, etcetera.
The three reporting agencies use slightly different formulas to build a credit score. The original FICO model was developed by Fair Isaac and Company.
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 each of the models considers a range of data available in your credit report, the differences aren't huge; each agency uses the following in calculating your credit score:
- Your Credit History - Have you had credit for many years, or for just a short time?
- Late Payments - Do you have a history of late payments?
- Balances on your Credit Cards - How many accounts? How much do you owe on your accounts?
- Requests for Credit - How many times have lenders pulled your credit for the purpose of giving you a loan?
These factors are assigned weights based on the formula being used. The result is a single number: your FICO score. FICO scores range from 300 to 800. Higher is better. Most folks who want to get a mortgage score 620 or above.
Not just for qualifying
Did you know? 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
Is there any way to improve your credit score? Because the FICO score is entirely based on your lifelong credit history, it is hard to make a significant change in the score with quick fixes. You must remove any incorrect reporting on your credit report; this is really the only "quick fix" for credit problems.
Know your FICO score
Before you can improve your credit score, you must obtain your score and make certain that the credit reports from each reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive, fast, and easy to get your credit score as well as reports from all three credit reporting agencies. They also provide helpful information and tools that can help you improve your credit score.
You can get a free credit report once a year from the three major agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast and inexpensive.
Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to get the right mortgage for you.
Want to know more about your FICO score? Call us at 954-400-0488.