About the FICO Credit Score

Since we live in an automated society, it's not surprising that your ability to repay your mortgage comes down to a single number. The FICO score is created by credit reporting agencies. These agencies use the payment history of your various loans: mortgages, car/motorcycle loans, credit cards, etcetera.

The three credit reporting 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 these methods vary from one agency to another, all of the agencies use the following to build your score:

  • Your Credit History - Have you had credit for many years, or for a short time?
  • History of Payments - Do you have a history of late payments?
  • Balances on your Credit Cards - How many accounts do you carry? How much do you owe on your accounts?
  • Requests for Credit - How many times have lenders pulled your credit report for the purpose of giving you a loan?

These factors are weighted differently depending on which formula the agency uses. The results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher is better. Most people getting a mortgage these days score 620 or above.

FICO makes a big difference in interest rates

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

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Since the score is entirely based on a lifetime of credit history, it's difficult to change it quickly. (Of course you can and should appeal incorrect items on your credit report.)

How do I find out my FICO score?

Before you can improve your score, you must know your score and make certain that the reports from each credit reporting agency are correct. Fair Isaac, the company that offered the original FICO score, sells FICO scores on myFICO.com. For a reasonable fee, you can get your FICO from all three reporting agencies, along with your credit report. Also available are helpful information and tools that can help you understand how to improve your FICO score.

You can get a federally-mandated free credit report every year from the three major agencies when you visit 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 information, 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? Give us a call at 630-717-3600.