FICO - Your Credit Score

Since we live in an computer-driven world, it should come as no surprise that your ability to repay your mortgage loan comes down to just one number. All the years you've been paying your various bills: your mortgage, car payments, and credit card bills are analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Equifax, TransUnion, and Experian, the three major credit reporting agencies, each have a proprietary formula for building your credit score. The original FICO score was developed by Fair Isaac and Company. 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 factors to calculate a credit score:

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

Each of these is assigned a value and a weight. The results are added up and distilled into a single number. FICO scores range from 300 to 800. Higher scores are better. Most people who want to get a mortgage have a score above 620.

Your FICO score greatly affects how much you pay in interest every month

Did you know? Credit scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.

Improving your score

Is it possible to improve your credit score? Despite what you hear from "credit repair" companies, the FICO score is calculated from your lifelong credit history, so you can't turn it around right away. (Of course you must have incorrect items removed from your credit report.)

How do I find out my FICO score?

In order to improve your score, you've got to have the credit reports that are used to build it. Of course, you need the score as well. 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 reporting agencies, along with your credit report. Also available are information and online tools that can 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 agencies at AnnualCreditReport.com. These reports do not include a free score, but it's very inexpensive to get one at the same time.

Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.

Want to know more about your FICO score? Give us a call: 610-565-3600.