About the FICO Credit Score

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Since we live in an computer-driven world, it's not surprising that your ability to repay your mortgage boils down to a single number. The FICO score is created by credit reporting agencies. These agencies use the payment history from your various loans: credit cards, mortgages, car/boat loans and others.

Each of the three credit agencies has its own formula for building your credit score. Fair Isaac and Cooriginally developed this score. . While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While the formulas vary, the differences aren't huge; they all use the following factors in building your score:

• Your Credit History - How many years have you had credit?
• History of Payments - Do you pay your bills on time?
• Balances on your Credit Cards - How many accounts do you carry? How much do you owe?
• Inquiries on Your Credit - How many times have you had your credit checked for a loan?

These factors are assigned weights based on the formula being used. Each formula produces a single number which may vary slightly by agency. FICO scores can be as low as 300 and as high as 800. Higher scores are better. Most home buyers in the current environment have a score above 620.

FICO makes a huge difference in your interest rate

FICO 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.

Can I raise my FICO score?

How can you improve your credit score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should, of course, appeal for the credit agency to remove any incorrect data on your credit report; this is really the only way to quickly improve your credit score.

How do I find out my FICO score?

To improve your credit 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 has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can get your FICO from all three reporting agencies, along with your credit report. Also available are information and 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 once per year from all three credit reporting agencies by visiting 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 get the right mortgage for you.

Curious about your FICO score? Call us at 972-891-8282.

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