How's your FICO Score?
Because our society is so automated, it should come as no surprise that your creditworthiness comes down to a single number.
The FICO score is compiled by credit agencies. They use the payment history of all of your loans: credit cards, mortgages, car/boat loans etcetera.
Each of the three credit reporting agencies has its own formula for building your 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 these methods vary from one agency to another, the differences aren't huge; each agency uses the following in building a credit score:
- Your Credit History - How many years have you had credit?
- Payment History - Do you have a history of late payments?
- Balances on your Credit Cards - How many accounts? How much do you owe on your accounts?
- Inquiries on Your Credit - How many times have lenders pulled your credit for the purpose of lending you money?
These factors are weighted a little bit differently depending 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. Typical home buyers likely find their FICO scores above 620.
Your FICO score greatly affects your interest rate
Did you know? Credit 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
What can you do to raise your FICO score? Very little in the short term. So called "credit repair" companies advertise quick fixes, but the FICO score is formulated from your lifelong credit history, so you can't turn it around right away. You must, of course, remove any incorrect data on your credit report, which is the only way to quickly improve your credit score.
How do I find out my credit score?
Before you can improve your credit score, you must get your score and make sure that the credit 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 score from all three reporting agencies, along with your credit report. They also provide helpful information and tools that can help you understand how to improve your FICO score.
You can get a free credit report once a year from all three agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is fast and very inexpensive.
Now that you have all the facts, you'll be a more informed consumer and you'll be better positioned to obtain the right mortgage for you.
Want to know more about your FICO score? Call us: 2147187183.