How's your FICO Score?
Because our society is so automated, it should come as no surprise that your ability to repay your mortgage loan comes down to a single number.
Credit reporting agencies use your history of paying loans to compile your FICO score.
All three major 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, each agency uses the following to calculate a score:
- Credit History - Have you had credit for years, or for a short time?
- History of Payments - Do you have a history of late payments?
- Balances on your Credit Cards - How many accounts? How much do you owe on your accounts?
- Credit Inquiries - 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 credit score. FICO scores can be as low as 300 and as high as 800. Higher is better. Most folks getting a mortgage loan these days have a score above 620.
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 raise my FICO score?
Unfortunately, there isn't a lot you can do to immediately improve your credit score. Since the score is entirely based on your lifelong credit history, it's very difficult to significantly improve the score with quick fixes. You should appeal for the credit agency to remove any incorrect data on your credit report, which is the only way to quickly improve your credit score.
How do I find out my FICO score?
In order to raise your credit score, you've got to get 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 along with reports from all three reporting agencies. They also provide helpful information and online tools that can help you understand how to improve your FICO score.
You can get a federally-mandated free credit report once a year from the three major agencies when you visit AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.
Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to get the most favorable mortgage.
Curious about your FICO score? Give us a call: 3523694200.