How's your FICO Score?
Since our society is so computer-driven, you're probably not surprised to hear that your ability to repay virtually any loan boils down to one number.
All the years you've been paying your various bills: your mortgage, car payments, and credit card bills are analyzed, sliced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.
All three credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a 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, all of the agencies use the following to determine your score:
- Credit History - Have you had credit for many years, or for a short time?
- Late 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?
Each of these is assigned a value and a weight. The result is one number. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Typical home buyers likely find their credit scores between 620 and 800.
Not just for qualifying
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.
Can I improve my credit score?
What can you do to improve your FICO score? Very little in the short term. 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 can and should appeal incorrect items on your credit report.)
Getting your FICO score
To raise your FICO score, you've got to get the reports that are used 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 quickly get your FICO score from all three reporting agencies, along with your credit report. They also provide helpful information and 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 agencies at 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.
Armed with this info, 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 8102292820.