FICO - Your Credit Score

Because we live in a computer-driven world, it should come as no surprise that your creditworthiness boils down to one number. This score is created by credit reporting agencies. They use the payment history from your various loans: credit cards, mortgages, car loans and the like.

Equifax, TransUnion, and Experian, the three major credit agencies, each have a proprietary formula for building your credit score. The original FICO score 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 factors in calculating a score:

• Your Credit History - How many years have you had credit?
• Late Payments - Do you have any payments later than 30 days?
• Balances on your Credit Cards - How many credit card accounts do you hold, and how much do you owe?
• Credit Inquiries - How many times have you had your credit checked for a loan?

Each of these is assigned a value and a weight. Each formula produces a single number which may vary slightly by agency. Credit scores range from 300 to 800. Higher is better. Most people who want to get a mortgage these days score 620 or above.

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.

Can I raise my FICO score?

What can you do to improve your FICO score? Very little in the short term. So called "credit repair" companies advertise quick fixes, but the score is calculated from your lifetime credit history, so it's not possible to raise it significantly in the short term. (Of course you can and should remove incorrect data on your credit report.)

Getting your credit score

Before you can improve your credit score, you have to obtain your score and ensure that the credit reports from each credit reporting agency are correct. Fair Isaac, the corporation that invented the original FICO score, sells FICO scores on myFICO.com. For a reasonable fee, you can quickly get your FICO from all three agencies, along with your credit report. Also available are helpful information and online tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report every year from all three agencies when you visit 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.

Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Curious about credit scores? Call us at 610-565-3600.