Scoring your Credit - How's your FICO?

Since we live in an automated, you're probably not surprised to hear that your ability to repay your mortgage comes down to one 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. The original FICO was developed by Fair Isaac and Company. 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; each agency uses the following factors to build your credit score:

• Credit History - How many years have you had credit?
• Late Payments - Do you have any payments later than 30 days?
• Balances on your Credit Cards - How many accounts do you carry? How much do you owe on your accounts?
• 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. 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. Typical home buyers will likely find their credit scores falling between 620 and 800.

Not just for qualifying

Did you know? Credit 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.

Improving your score

Is it possible to improve your FICO score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you must appeal incorrect items on your credit report.)

How do I find out my credit score?

Before you can improve your FICO score, you have to know your score and be sure that the credit reports from each reporting agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to quickly get your FICO score from all three reporting agencies, along with your credit report. They also provide information and online tools that help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once a year from all three credit reporting 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'll be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Want to know more about credit scores? Call us at 6263394445.