How's your FICO Score?
Because we live in an automated, it's probably not that surprising that your creditworthiness comes down to one number.
Credit reporting agencies use your payment history to compile this score.
TransUnion, Equifax, and Experian, the three major credit reporting agencies, each have a proprietary formula for building your 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 these methods 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 years, or for just a short time?
- Late Payments - Do you have any payments later than 30 days?
- Balances on your Credit Cards - How many accounts do you have, and how much do you owe on them?
- Requests for Credit - How many times have lenders pulled your credit for the purpose of lending you money?
Each of these is assigned a value and a weight. The results are added up and distilled into a single number. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Most home buyers likely find their FICO scores above 620.
Not just for qualifying
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 probably a better credit risk, and thus may qualify for a better mortgage rate.
Raising your FICO score
Unfortunately, there isn't a lot you can do to immediately improve your credit score. Since the score is based on your lifelong credit history, it's very hard to significantly improve the number with quick fixes. (Of course you can and should appeal incorrect items on your credit report.)
Getting your credit score
To improve your score, you've got to obtain the credit reports that the agencies use 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. It's inexpensive, fast, and easy to get your credit score as well as reports from all three reporting agencies. They also provide helpful information and online tools that help you analyze what actions might have the greatest impact on your FICO score.
You can get a federally-mandated free credit report every year from all three credit reporting 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.
Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to get the right mortgage for you.
Curious about your credit score? Call us: 352-369-4200.