How's your FICO Score?
Since we live in an computer-driven world, it should come as no surprise that your ability to repay your mortgage loan comes down to just one number.
This score is built by credit reporting agencies. They use the payment history of your various loans: mortgages, car loans, credit cards, and others.
Each of the three credit 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, all of the agencies use the following to determine your score:
- Credit History - How long have you had credit?
- Late Payments - Have you paid more than 30 days late, and how often?
- Your Credit Card Balances - How many credit card 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 giving you a loan?
Each of these 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. Most people who want to get a mortgage loan score 620 or above.
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
Unfortunately, there isn't a lot you can do to immediately improve your credit score. Some companies promise quick fixes, but they can't do anything different than what you can do — for free. You should, of course, remove any incorrect data on your credit report, which is the only way to quickly improve your credit score.
Know your FICO
Before you can improve your FICO score, you must get your score and be sure that the reports from each agency are correct. Fair Isaac, the company that offered the original FICO score, offers FICO scores on myFICO.com. It's inexpensive to quickly get your FICO from all three agencies, along with your credit report. Also available are information and tools that can help you understand how to improve your FICO score.
You can get a federally-mandated free credit report once per year from all three credit reporting agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast and very inexpensive.
Armed with this information, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.
Curious about your FICO score? Call us at 2147187183.