About the FICO Credit Score
Since our world is so automated, it should come as no surprise that your creditworthiness comes down to a single number.
The years of paying your various bills: your mortgage, car 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. .
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; they all use the following to calculate a score:
- Credit History - How many years have you had credit?
- Payment History - Do you have any payments later than 30 days?
- Credit Card Balances - How many accounts do you hold, and how much do you owe on them?
- Inquiries on Your Credit - How many times have lenders pulled your credit report 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 can be as low as 300 and as high as 800. Higher scores are better. Most home buyers will likely find their FICO scores falling above 620.
Credit scores make a difference in your interest rate
FICO scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.
Raising your credit score
Is there any way to raise your FICO score? Since the FICO score is based on a lifetime of credit history, it is difficult to make a significant change in the score with quick fixes. You must remove any incorrect reporting 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 FICO score, you must 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 score, offers FICO scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score along with reports from all three agencies. They also provide helpful 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 at AnnualCreditReport.com. These reports do not include a free score, but it's very inexpensive to get one at the same time.
Armed with this info, you'll be a more informed consumer and you'll be better positioned to get the right mortgage for you.
Want to know more about your FICO score? Call us: 7862626486.