You Credit Score: How's Your FICO?

Since we live in an computer-driven society, it should come as no surprise that your ability to repay your mortgage loan comes down to a single number. Credit reporting agencies use your history of paying all types of loans to compile a FICO score.

All three major credit reporting 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, the differences aren't huge; each agency uses the following in building a score:

• Your Credit History - Have you had credit for many years, or for just a short time?
• History of Payments - Do you have any payments later than 30 days?
• Your Credit Card Balances - How many accounts do you hold, and how much do you owe on them?
• Credit Inquiries - How many times have lenders pulled your credit report for the purpose of giving you a loan?

These factors are weighted differently depending on which formula the agency uses. 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 is always better. Most people who want to get a mortgage have a score above 620.

Your FICO score affects your interest rate

Credit 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.

Raising your FICO score

Is there any way to raise your credit score? So called "credit repair" companies advertise quick fixes, but the score is built on your lifelong credit history, so you can't turn it around right away. You must remove any incorrect reporting on your credit report, which is the only "quick fix" for credit problems.

Getting your FICO score

Before you can improve your FICO score, you must know your score and be sure that the reports from each agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can quickly get your FICO from all three agencies, along with your credit report. They also provide helpful information and online tools that help you understand how to improve your credit score.

You can get a free credit report once per year from the three major 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.

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.

Curious about your FICO score? Call us: 866-300-1550.