You Credit Score: How's Your FICO?

Because our society is so computer-driven, it's probably not that surprising that your ability to repay your mortgage loan comes down to a single number. All the years you've been paying your various bills: your mortgage, car 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 reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a credit 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 the formulas vary from one agency to another, the differences aren't huge; they all use the following in building your credit score:

  • Credit History - Have you had credit for many years, or for just a short time?
  • Payment History - Do you pay your bills on time?
  • Balances on your Credit Cards - How many accounts? 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 assigned weights based on the formula being used. The result is a single number: your FICO score. Credit scores range from 300 to 800. Higher scores are better. Most home buyers these days have a score above 620.

Not just for qualifying

Did you know? 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 credit score

Unfortunately, there isn't a lot you can do to immediately 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 appeal for the credit agency to remove any incorrect reporting from your credit report, which is the only "quick fix" for credit troubles.

Getting your FICO score

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

You can get a free credit report every year from all three credit reporting agencies by visiting 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 your FICO score? Call us: 352-369-4200.

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