About the FICO Credit Score

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

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 from one agency to another, all of the agencies use the following to calculate a credit score:

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

Each of these factors 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 always better. Most folks who want to get a mortgage loan score 620 or above.

FICO makes a big difference in interest rates

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.

Raising your FICO score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Despite what you hear from "credit repair" companies, the score is based on your lifetime credit history, so you can't turn it around right away. (Of course you must remove incorrect data on your credit report.)

How do I find out my FICO score?

To raise your credit score, you must get the reports that are used to build it, and of course, you need the score itself. Fair Isaac, the company that offered the original FICO score, offers credit scores on its website: myFICO.com. For a reasonable fee, you can quickly get your FICO score from all three reporting agencies, along with your credit report. They also provide information and tools that help you improve 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 will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Curious about credit scores? Give us a call at 760.975.0255.