You Credit Score- How's Your FICO?

Since we live in an automated society, it's not surprising that your ability to repay your mortgage loan boils down to just one number. All the years you've been paying your various bills: your mortgage, vehicle payments, and credit card bills are analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

All three major credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. Fair Isaac and Cooriginally developed this score. . 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, each agency uses the following to determine your score:

• Your Credit History - Have you had credit for years, or for just a short time?
• Payment History - Do you pay your bills on time?
• Balances on your Credit Cards - How many accounts do you hold? How much do you owe on your accounts?
• Requests for Credit - How many times have you had your credit checked for a loan?

These factors are weighted slightly differently depending on which formula the agency uses. The result is one number. FICO scores range from 300 to 800. Higher scores are better. Most home buyers likely find their FICO scores falling above 620.

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

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 improve my FICO score?

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

Getting your credit score

In order to improve your score, you must get the credit reports that the agencies use to build it, and of course, you need the score itself. Fair Isaac, the company that invented the original FICO credit score, offers FICO scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as reports from all three agencies. Also available are information and online tools that can help you understand how to improve your FICO score.

You can get a free credit report once a year from the three major credit reporting agencies by visiting AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.

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

Want to know more about credit scores? Call us: (760) 943-7200.