You Credit Score- How's Your FICO?

Because our world is so automated, it should come as no surprise that your creditworthiness boils down to a single number. Credit reporting agencies use your payment history in order to compile your FICO score.

All three credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a credit score. The original FICO was developed by Fair Isaac and Company. 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; they all use the following to calculate a score:

  • Your Credit History - Have you had credit for many years, or for a short time?
  • Payment History - Have you paid more than 30 days late?
  • Balances on your Credit Cards - How many credit card accounts do you have, and how much do you owe?
  • Credit Inquiries - 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 may vary a a little by agency. FICO scores range from 300 to 800. Higher scores are better. Most borrowers who want to get a mortgage loan these days score 620 or above.

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.

Improving your score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should appeal for the credit agency to remove any incorrect data from your credit report, which is the only "quick fix" for credit problems.

Know your FICO

Before you can improve your score, you have to know your score and be sure that the reports from each agency are correct. 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 credit reports from all three reporting agencies. They also provide information and online tools that help you understand how to improve your credit score.

You can get a free credit report once per year from the three major credit reporting agencies at AnnualCreditReport.com. These reports do not include a free score, but it's very inexpensive to get one at the same time.

Now that you have all the facts, 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? Call us at (941) 366-5800.

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