How's your FICO Score?

Because we live in an automated, you're probably not surprised to hear that your ability to repay virtually any loan comes down to a single number. This score is created by credit reporting agencies. They use the payment history from all of your loans: mortgages, car loans, credit cards, etcetera.

Equifax, TransUnion, and Experian, the three major credit reporting agencies, each have a proprietary formula for building a 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 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 building your score:

• Credit History - How many years have you had credit?
• Payment History - Have you paid more than 30 days late?
• Balances on your Credit Cards - How many accounts do you have, and how much do you owe on them?
• Credit Inquiries - How many times have lenders pulled your credit for the purpose of lending you money?

These factors are assigned weights based on the formula being used. The results are added up and distilled into a single number. FICO scores range from 300 to 800. Higher is always better. Typical home buyers likely find their FICO scores falling above 620.

Not just for qualifying

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Lenders give lower interest rates to individuals with higher scores.

Improving your score

What can you do to raise your FICO score? Very little in the short term. 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 on your credit report; this is really the only way to quickly improve your credit score.

How do I find out my credit score?

To improve your credit score, you've got to obtain the credit reports that the agencies use to build it. Of course, you need the score as well. 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 as well as reports from all three credit reporting agencies. They also provide 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 once per year from all three 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? Give us a call: (941) 366-5800.