FICO - Your Credit Score

Since we live in an computer-driven society, it should come as no surprise that your ability to repay your mortgage boils down to just one number. All the years you've been paying your various bills: your mortgage, car payments, and credit card bills are 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. . 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, each agency uses the following to build your credit score:

  • Credit History - Have you had credit for years, or for a short time?
  • History of Payments - Do you have a history of late payments?
  • Credit Card Balances - How many accounts? How much do you owe on your accounts?
  • 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 results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher is always better. Most home buyers will probably find their scores falling between 620 and 800.

Not just for qualifying

Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

What can you do about your FICO score? Very little in the short term. Since the FICO score is entirely based on your lifelong credit history, it's difficult to change it quickly. (Of course you must remove incorrect data on your credit report.)

Know your FICO score

Before you can improve your FICO score, you have to know your score and make certain that the reports from each agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. For a reasonable fee, you can get your FICO from all three agencies, along with your credit report. They also provide information and tools that can help you understand how to improve your credit score.

You can get a free credit report once per year from all three agencies by visiting 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 get the right mortgage for you.

Want to know more about your FICO score? Call us at (813) 200-7931.

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