You Credit Score- How's Your FICO?

Since we live in an computer-driven society, it's not surprising that your ability to repay your mortgage loan boils down to a single number. All the years you've been paying your various bills: your mortgage, vehicle payments, and credit card bills are analyzed, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

Each of the three credit reporting agencies has its own formula for building your credit score. Fair Isaac and Cooriginally developed this score. . While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While these methods vary from one agency to another, each agency uses the following to determine a score:

  • Credit History - How long have you had credit?
  • History of Payments - Do you pay your bills on time?
  • Balances on your Credit Cards - How many credit card accounts do you hold, and how much do you owe on them?
  • Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of giving you a loan?

These factors are assigned weights based on the formula being used. Each formula produces a single number which may vary slightly from one agency to another. FICO scores range from 300 to 800. Higher scores are better. Most home buyers likely find their credit scores above 620.

Credit scores make a big difference in your interest rate

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.

Can I raise my FICO score?

What can you do to raise your FICO score? Very little in the short term. Since the credit score is based on a lifetime of credit history, it is difficult to make a significant improvement in the score with quick fixes. You should appeal for the credit agency to remove any incorrect data from your credit report; this is really the only "quick fix" for credit troubles.

How do I find out my FICO score?

In order to improve your credit score, you've got to obtain the reports that are used to build it. Of course, you need the score as well. Fair Isaac, the company that invented the original FICO score, sells credit scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score along with reports from all three agencies. Also available are helpful information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a free credit report once a 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.

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

Curious about credit scores? Call us at (941) 366-5800.

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