FICO - Your Credit Score

Because our world is so computer-driven, it should come as no surprise that your ability to repay virtually any loan comes down to one number. Credit reporting agencies use your payment history in order to build this score.

The three reporting agencies use slightly different formulas to build 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 each of the models considers a range of data available in your credit report, the differences aren't huge; all of the agencies use the following in calculating a score:

  • Your Credit History - Have you had credit for many years, or for a short time?
  • History of Payments - Have you paid more than 30 days late?
  • Credit Card Balances - How many accounts? How much do you owe?
  • Requests for Credit - How many times have you had your credit checked for a loan?

Each of these is assigned a value and a weight. Each formula produces a single number which may vary slightly from one agency to another. FICO scores can be as low as 300 and as high as 800. Higher scores are better. Most people getting a mortgage score 620 or above.

FICO makes a huge difference in interest rates

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 FICO score

Is it possible to raise your credit score? Because the score is based on a lifetime of credit history, it's very hard to change it quickly. (Of course you can and should remove incorrect data on your credit report.)

Know your FICO score

Before you can improve your credit score, you must know your score and make certain that the credit reports from each agency are correct. Fair Isaac, the corporation that invented the original FICO score, offers FICO scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three credit reporting agencies. Also available are information and tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report every year from the three major agencies when you visit AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is quick and very inexpensive.

Armed with this information, you will be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.

Curious about your credit score? Give us a call at 352-369-4200.

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