How's your FICO Score?

Since we live in an computer-driven society, it should come as no surprise that your ability to repay your mortgage comes down to a single number. The years of paying your various bills: your mortgage, vehicle payments, and credit card bills can be analyzed, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

The three 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 to calculate a credit score:

  • Credit History - How many years have you had credit?
  • Payment History - Do you have a history of late payments?
  • Credit Card Balances - How many accounts? How much do you owe?
  • Inquiries on Your Credit - How many times have you had your credit checked for a loan?

Each of these factors is assigned a value and a weight. Each formula produces a single number which varies slightly from one agency to another. Credit scores can be as low as 300 and as high as 800. Higher scores are better. Most borrowers who want to get a mortgage score 620 or above.

Not just for qualifying

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

Can I improve my credit score?

What can you do to raise your FICO score? Very little in the short term. Because the FICO score is entirely based on your lifelong credit history, it's very hard to significantly improve the number with quick fixes. You should appeal for the credit agency to remove any incorrect reporting on your credit report, which is the only way to quickly improve your credit score.

Know your FICO score

Before you can improve your score, you have to get your score and make certain that the reports from each credit reporting agency are correct. Fair Isaac, the corporation that invented the original FICO credit score, sells credit scores on its website: myFICO.com. For a reasonable fee, you can get your FICO score from all three agencies, along with your credit report. Also available are information and tools that can help you improve your FICO score.

You can get a federally-mandated free credit report every year from all three agencies at AnnualCreditReport.com. These reports do not include a free credit score, but it's very inexpensive to get one at the same time.

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

Want to know more about your FICO score? Give us a call: (941) 366-5800.

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