About the FICO Credit Score

Since we live in an computer-driven society, it should come as no surprise that your ability to repay your mortgage loan comes down to just one number. All the years you've been paying your various bills: your mortgage, vehicle payments, and credit card bills can be 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. . 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 these methods vary from one agency to another, each agency uses the following to build your credit score:

  • Your Credit History - How long have you had credit?
  • Late Payments - Do you have any payments later than 30 days?
  • Credit Card Balances - How many credit card accounts do you hold, and how much do you owe?
  • Inquiries on Your Credit - 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 one number. Credit scores range from 300 to 800. Higher scores are better. Most home buyers in the current environment have a score above 620.

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 a better credit risk, and thus may qualify for a better mortgage rate.

Raising your FICO score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Despite what you hear from "credit repair" companies, the score is formulated from your lifetime credit history, so it's not possible to raise it significantly in the short term. (Of course you must remove incorrect data on your credit report.)

How do I find out my FICO score?

To improve your FICO score, you've got to have the credit reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac, the company that invented the original FICO credit score, offers credit scores on myFICO.com. It's inexpensive, fast, and easy to get your credit score along with credit reports from all three credit reporting agencies. They also provide information and online 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 by visiting 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.

Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Want to know more about your credit score? Give us a call: (207) 571-8034.